Premium bond prizes increase
October’s premium bond draw has increased with an extra 500,000 prizes up for grabs.
The move means the chances of winning a prize has increased from 1% (or 36,000 to 1), to 1.5% (or 24,000 to 1). There are currently 23 million premium bond holders.
National Savings & Investments (NS&I) – the government-backed bank that offers premium bonds – expects to pay out £52 million in prizes next month, up from £33 million in September.
The total number of prizes up for grabs has increased by from 1.1 million to 1.7 million. However, the majority of prizes (89%) will be for cash amounts of between £25 and £500. Just 6% will be for more than £5,000 and there is only one £1 million jackpot each month.
A further 5% of prizes will be for £500 to £1,000 prizes.
Peter Cornish, director of customer offer at NS&I, says it reviews the premium bond prize draw each month to ensure it “balances the interests of savers, the taxpayer and the stability of the wider financial services market”.
In March, NS&I cut its prize rate from 1.8% to 1% in response to the Bank of England cutting the base rate to just 0.5%.
Cornish adds: “Premium nonds are hugely popular with our customers and we know that winning prizes frequently is particularly important to them.”
What are premium bonds?
Premium bonds are offered by National Savings & Investments (NS&I) and are open to investment from anyone aged 16 or over. You can, however, buy premium bonds on behalf of your children or grandchildren.
You'll need at least £100 to invest in premium bonds (or £50 if you buy by monthly standing order), and the maximum investment is £30,000.
Although you won't earn any interest on your capital, every month NS&I holds a prize draw with a £1 million jackpot and one million tax-free prizes. Clearly, the more bonds you hold the more chance you have of winning.
By investing your money with NS&I you'll benefit from the government's 100% protection guarantee. Around 23 million people hold premium bonds worth a collective £26 billion.
NS&I describes premium bonds as "a fun, yet serious way of saving, combining the chance of winning tax-free prizes with the peace of mind that comes from knowing your capital is 100% secure".
You can cash in your bonds at any time.
A form of National Savings Certificate, premium bonds are effectively gilt-edged securities: you loan your money to the government and, in return, it pays you for the privilege with a guarantee it will return your capital at a specified date. Where premium bonds differ is that the interest payments (currently 1.5%) are pooled and paid out as prize money and you can get your cash back within a fortnight, with no risk. Launched by Chancellor of the Exchequer Harold Macmillan in his 1956 Budget, every single £1 unit has the same chance of winning and in May 2011, 1,772,482 winners (from a total draw of 42,539,589,993 eligible bond numbers) shared £53,174,500. The odds of winning are 24,000 to 1 and the maximum holding is £30,000 per person but it remains the only punt in which you can perpetually recycle your stake money.
Also referred to as the bank rate or the minimum lending rate, the Bank of England base rate is the lowest rate the Bank uses to discount bills of exchange. This affects consumers as it is used by mainstream lenders and banks as the basis for calculating interest rates on mortgages, loans and savings.