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Premium bonds hit 60 this year, but are they old-fashioned?

By December 22, 2016February 12th, 2019No Comments

Premium bonds hit 60 this year. On the 1st November 1956 the first ever premium bond was sold, with £5 million worth of premium bonds sold on the first day alone. Now there are 21 million people holding more than £63 billion in premium bonds which proves it is still a popular form of investment. The first draw, with a top prize of £1,000 was held on 1st June 1957. Since the inception of the premium bond, £17 billion has been handed out in the form of 355 million prizes.

As premium bonds have just celebrated their 60th birthday, it’s a good opportunity to see whether they are a good investment opportunity. Even though they are getting on a bit, they remain popular as they now offer two jackpots a month worth £1 million each, but in reality they are a lottery rather than an investment opportunity.

Why premium bonds may not be for you

For every £1 you invest in a premium bond, you receive a unique bond number; this enters you into the draw to win a tax-free cash prize. They don’t earn any interest, as the interest accrued is used to fund the prizes. An example of the odds of winning is 26,000 to one for winning £25 for each bond number, therefore the odds for winning the £1 million jackpot rises to 26 million to one.  So if you’re not the lucky kind and are after a guaranteed return, premium bonds are not the investment for you.

Do it yourself saving

There are however, some benefits to investing with premium bonds. As a National Savings & Investment product, all money invested is backed by the treasury, this means your money is protected in full. Another benefit of premiums bonds is you can cash them in easily by post, phone or email and there are no charges associated.