Premium Bonds

Premium bonds are essentially savings account that you can put money in. The interest rates of the bonds depends on a monthly draw. From these draws, you get a chance of winning between £50 and £1 million, all of which are tax-free. You’re probably thinking this is too good to be true, well, to put it bluntly, it is. There is so much involved in keeping premium bonds and so little chances of winning. Most investors don’t even settle for this type of investment but still risk it in order to win that promising price. Part of the excitement of investing in Premium Bonds is the fact that you have the chance of winning large cash prizes every month.

How Premium Bonds Work

To start investing in premium bonds, you first have to buy them. With these types of bonds there is a minimum holding amount which is £100 but can lower down to £50 especially for standing orders made monthly. The maximum holding amount is £30,000. When you put a £100 in, you basically get a thousand £1 Bonds. All of these £1 Bonds will then be entered for the monthly draw. You can buy these bonds online, through telephone orders, standing orders, and even in Post offices.

Some Facts You Should Know About Premium Bonds

Premium bonds are issued by the National Savings and Investments of the United Kingdom. Instead of a bank, these bonds are backed by the nation’s treasury which makes the capital you put in to remain safe. The only risks you encounter with these bonds are the interests that you can get.

Anyone over the age of sixteen can buy Premium bonds from any recognized outlet. Those under the age of sixteen can buy these bonds but the bonds have to remain under the name of the child’s parents or guardians.

The winnings for the monthly draw in Premium bonds are done by random using ERNIE. ERNIE was first introduced in the year 1957 and has since evolved into ERNIE 2, ERNIE 3, and the latest ERNIE 4. ERNIE 4 uses the technology of thermal noise in transistors to come up with random bond numbers.

The Odds Involved in Premium Bonds

The chances of winning a premium bond lottery can be very discouraging, with a figure of 24,500,000,000 – 1 for every £1 bond. However, since the minimum holding amount of £100 provides one a hundred chances of winning, the odds are cut down to 245 million to one. According to NS&I, the chances of winning are actually 24,000 to one that is if you settle for any prize.

Winning in the monthly draw of Premium bonds are generally much like any National Lottery. The only difference between the two is that if you lose, you do not give up your stakes, you simply go into next month’s draw.

How to Increase Your Chances of Winning On The Premium Bonds

If you want to increase your chances of winning in a Premium Bond draw, you have to be willing to buy more bonds. If you invest in the maximum holding amount of £30,000, you can receive as much as fifteen prizes in a year, in average luck. Keep in mind that average luck cannot guarantee that you’ll win. If you want to succeed in Premium bonds investing, you have to be willing to study and master the trade so that you have more chances of winning and beat that discouraging odds every single time.