About Premium Bonds
Premium Bonds have surged in popularity over the last decade. This article is a brief guide to what they are and how you can benefit from them.
What are Premium Bonds?
Premium Bonds are a government-backed method of investment, operated by National Savings and Investment. They are very low risk - there's no chance of losing your original investment, although there's no guarantee you'll see any return.
Introduced in 1956, the bonds were intended to encourage savings among those who were not attracted by traditional, interest-earning savings accounts. Instead, premium bond holders have the chance to win cash prizes in a draw every month, with bond numbers picked by the famous ERNIE (Electronic Random Number Indicator Equipment).
What can you win?
Every £1 bond you buy gives you a single entry into a monthly draw, with the chance of winning either a jackpot of £1m or over a million of smaller cash prizes.
The total prize fund depends on the amount of bonds currently issued, and translates to an average interest rate of 3.2% at the time of writing.
The rate may seem low compared to some other investments, but all premium bond prizes are tax-free.
Next : How to invest and unclaimed prizes >>>
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