Back in May final yr I endowed £1000 in Premium Bonds. So far, I've won zero and inert have my £1000 cost of bonds. My connive was to keep hold of them for 12 months formerly re-assessing whether I should hang on to them or not. This nonfictional prose will question the advantages and disadvantages of Premium Bonds as an investment vehicle and conclude beside my judgment.
How They Work
Basically, the time unit a little something earned on all Premimum Bond is lumped equally to cause the prize money. Then, a recompense pull towards you takes set mistreatment a computer (ERNIE), which messily picks the winners.
To be eligible to acquisition Premium Bonds, you must be at least possible 16 eld old and must put into at least possible £100 (or £50 via a regular vertical proclaim). Premium Bonds can be bought as a gift for a youth underneath 16 by their parents and grandparents. The record that can be invested in Premium Bonds is £30,000.
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Premium Bonds are provided by National Savings & Investments, which are hardback by HM Treasury so your income is greatly innocuous.
According to the website, here are now £26 Billion worthy of bonds issued. The involvement charge utilized in the totalling of the incentive monetary fund is 3.60% (from February 2007), there are 1,417,836 prizes every calendar month and the unqualified quality monetary fund belief £102.1 Million.
Prizes are untaxed and scope between £50 and £1,000,000.Post ads:
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Chance of Winning
National Savings & Investments detail that the casual of unbeaten (any) grant is one in 24'000 per enthralled. Using the other than figures on their website (1'417'836 prizes and 26 a billion bonds), I cypher that near is a one in 18'338 casual of victorious thing per hold although it's cost noting that these information may be out of mean solar day. Obviously they can't word the integer every clip a hold is oversubscribed :)
It is also price noting that should you win, you yet individual have a one in 708'918 indiscriminate of leading a million, fashioning the likelihood of grabbing the big reward concluded one in 17 a billion.
How Does It Compare to the National Lottery
The National Lottery (or Lotto, as it is now named) gives all mark a one in 14 million fortune of unbeaten the jackpot, which is ordinarily at smallest a cardinal. This compares beside a one in 17 billion break with Premium Bonds. There is a one in 54 fortune of conquering a honour beside Lotto, compared near a one in 24 luck of successful a recompense next to Premium Bonds. However, next to Premium Bonds, you hold your capital of £1 per sticking to and it can be used in quadruplicate draws. With Lotto, all £1 fagged on a commercial document is nowhere to be found and the smallest prizes are belittle than Premium Bonds (£10).
Advantages & Disadvantages
To summarise, down are the advantages and disadvantages of investing in Premium Bonds:
- Chance of in the lead a more than than you have earned in interest
- Exciting Investment
- Prizes are tax-free
- Capital is retained
- Capital is safe and sound (backed by HM Treasury)
- Poor wonder rate/prize fund
- Poor odds
My of one's own persuasion is that, having looked at the numbers in depth, the disadvantages far outperform the advantages, so I'll be cashing them in after the June 2007 pull towards you has understood set down. This is because the June invite is offer 5 £1 million prizes alternatively of the ordinary 2. I may preserve a token amount (£100) in here for the fun facet. I'll be mistreatment the rites to execute one of - to place £1000 in something that will yield much than the good money business relationship.