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Premium Bonds – NS&I Savings Form of Investment


December 2, 2020
Premium Bonds were first presented to the public in 1956 by the NS&I savings as a form of investment item and are currently possessed by close to 23 million people across the UK.
Premium Bonds – NS&I Savings Form of Investment
Bonds market might present you with an excellent method for you to save. But there are pros and cons you ought to think before putting your cash on the table.
 
This guide clarifies what bonds are, how they work, how you can get them as well as if they are worth it in 2020.

What are Premium Bonds?

Premium bonds can get explained as the National Savings Investments (NS&I) item. Every £1 invested gets assigned a unique number. All the numbers get included in a monthly prize draw to win a prize.
 
To increase the chance to win over £25 – £1 million worth of tax-free prizes, you must forgo interest rates.
 
So, the deal here is that, whereas your money will not gain any interest while you invest it. You increase the odds of winning up to £1 million. Yet, since this is like a lottery, the chances of not winning anything is also high. Plus, your money will not in any way shielded from reductive impacts from inflation.
 
As a parent or guardian, you may buy premium bonds through the NS&I website on behalf of your kids. Also, grandchildren of less than 16 years of age.
 
The National Treasury supports investments NS&I and thus guarantees 100% cash security.
 
How Do You Get Premium Bonds?
 
You may buy bonds any time using online and phone services from the NS&I site. If you do already have premium bonds, you might get asked for your premium bonds’ holder number.
 
And if you have not bought any bonds before, the NS&I would check both your identity as well as your address. Also, you might need to proof of the two requirements.
 
Every investment made must be of the smallest amount of £25, and you may only invest in whole amounts in pounds. But, the most possible amount to invest in premium bonds is £50,000. Any amount above the £50,000 will not be eligible to win any prizes.

How Do Premium Bonds Function?

premium bonds of the ns&i

First, you start by putting cash investment into buying a specified amount of bonds. For each £1, you get a number generated by an electronic random number indicator equipment. In the case, for instance, you decide to spend £400, you will receive 400 bonds in return.
 
Every bond number you get is an entry into the prize draw as well as an opportunity to win up to £1m. But, you ought to hold the bond for at least one month before the bond get added onto the draw.
 
The higher the amount of cash you invest, the more the bonds you receive. The higher the chance you will have of winning the unclaimed prizes. It’s like a lottery in the sense that – you may get more bonds as a way of increasing your chances to win the draw prize. Yet, you should understand that there is no guarantee of winning.
 
The following are most asked questions on how premium bonds function:
  1. What amount can a person invest in Premium Bonds? Every individual who wishes to invest in bonds must put at least £25 and not more than £50,000 in the NS&I savings.
  2. What quantity of Bonds can a person buy? The highest amount of Premium Bonds an individual may get is 50,000.
  3. How much do Bonds cost? You can buy a single bond in every £1 that you invest in NS&I savings product.
  4. Is it possible to invest in Bonds for children? An individual may buy bonds for himself/herself. Also, for their children, grandchildren or even the great-grandchildren.
  5. What is the legal age for purchasing bonds? The legal need for buying bonds for yourself is to be above the age of 16.
  6. When do bonds draw take place? Bonds draw for prizes occurs on the 1st of each month.

How can a person check if their bonds have won?

To check if your investment number has won during the draw. You have to enter the bond numbers that you get when buying onto the NS&I premium bonds checker.
 
You should get informed that whereas the draw gets carried monthly. Every 1st of the month, the outcomes of the draw usually are not uploaded on the NS&I site until the 3rd of that month.
 
Every month, the bonds draw prizes for winning are as follows:
  1. £25.0
  2. £50.0
  3. £100.0
  4. £500.0
  5. £1,000.0
  6. £5,000.0
  7. £10,000.0
  8. £25,000.0
  9. £50,000.0
  10. £100,000.0
  11. £1,000,000.0

In every month, there are two winners of £1 million. While other investors win several more winnings of lower prices.

What is the most suitable time to purchase Premium Bonds?

Stock Markets - looking for premium bonds to save money

There is not the right or wrong time to buy bonds. Yet, you should understand that you need to hold onto to your bonds until the end of the month. Before they become eligible to enter the monthly draw. For instance, if you buy bonds during working days in March. Afterwards, the bonds would get eligible to win the monthly draw prize from May onwards.

Premium bonds are best to various groups of persons such as those who:

  1. Are attracted with the opportunity of winning tax-free prizes once every month.
  2. Wish to invest in the bond until the child, the grandchild or great-grandchild becomes 16 years of age.
  3. Have extra money – a minimum of £25 – that the individuals wish to invest away from the regular savings accounts.

Premium bonds may not be best for individuals who:

  1. Are worried about the impact of inflation on their cash savings.
  2. Are searching for a constant source of income or prize fund interest rate.
  3. Are looking for guaranteed profit returns.

Are Premium Bonds Worth it in 2020?

It is hard to conclude and tell you whether the bonds market can be worth it in 2021.

Yet, if you ask an individual who recently won a prize of £100,000. Those who won the money within their first year after buying their first bonds. They stick to the position that bonds are worth it still in 2021. But, if you ask an individual who since started buying bonds never won any prize. And has invested about to £50,000 of their cash in bonds for over three years (with no interest). Then, such an individual will tell you that bonds are not worth it in 2020.

Additionally, the chance you have of winning the most rewarding prizes are minimal. Thus, you should not invest in bonds expecting to win and earn good money to become rich. It may happen; yet, it will never.

In case you hold your bonds for several years, and you do not win any significant prizes. It will imply that your returns may not overweigh inflation. Thus, indicating that you would at the end. Missing out on tremendous opportunities to grow your cash through other interest-earning savings.

Premium Bonds of NS&I Final Words

invest in bonds

Despite all the disadvantages of buying bonds, they are safe and secure. thus implying that it is an honest means of investing and saving a part of your money. Yet, if you feel bonds are the right way for you, you might go for it. After all, anyone who has ever won the ultimate prize would tell your bonds are worth it in 2021.

So, in conclusion, the final decision if bonds are worth it in 2021 lies on you. Depending on your needs and expectations.


Disclaimer: This article is not investment advice or an investment recommendation and should not be considered as such. The information above is not an invitation to trade and it does not guarantee or predict future performance. The investor is solely responsible for the risk of their decisions. The analysis and commentary presented do not include any consideration of your personal investment objectives, financial circumstances or needs.

Risk Warning: Our products are traded on margin and carry a high level of risk and it is possible to lose all your capital. These products may not be suitable for everyone and you should ensure that you understand the risks involved.

Categories: Trading , Education

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