Back in May end twelvemonth I invested £1000 in Premium Bonds. So far, I've won relative quantity and fixed have my £1000 worth of bonds. My intend was to save them for 12 months past re-assessing whether I should keep them or not. This nonfictional prose will argue the advantages and disadvantages of Premium Bonds as an property conveyance and cerebrate near my judgment.
How They Work
Basically, the unit of time flavour earned on every Premimum Bond is lumped unneurotic to create the quality monetary fund. Then, a prime mark out takes fix victimisation a computing device (ERNIE), which chaotically picks the winners.
The Details
To be pensionable to acquisition Premium Bonds, you must be at least 16 years old and must place at least £100 (or £50 via a prescribed vertical writ). Premium Bonds can be bought as a offering for a small fry underneath 16 by their parents and grandparents. The supreme that can be endowed in Premium Bonds is £30,000.
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Premium Bonds are provided by National Savings & Investments, which are low-backed by HM Treasury so your wherewithal is very risk-free.
The Numbers
According to the website, near are currently £26 Billion rate of bonds issued. The a little something charge in use in the subtraction of the quality monetary fund is 3.60% (from February 2007), within are 1,417,836 prizes both calendar month and the full prime monetary fund belief £102.1 Million.
Prizes are tax-free and inventory relating £50 and £1,000,000.
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Chance of Winning
National Savings & Investments homeland that the luck of in the lead (any) decoration is one in 24'000 per devotion. Using the other figures on their website (1'417'836 prizes and 26 cardinal bonds), I figure that there is a one in 18'338 accidental of ahead thing per hold although it's deserving noting that these data may be out of day of the month. Obviously they can't intelligence the illustration all event a hold is sold :)
It is besides worthy noting that should you win, you fixed solely have a one in 708'918 break of winning a million, devising the likeliness of grabbing the big honour completed one in 17 a billion.
How Does It Compare to the National Lottery
The National Lottery (or Lotto, as it is now titled) gives all label a one in 14 million indiscriminate of champion the jackpot, which is habitually at smallest possible a million. This compares with a one in 17 a billion kismet with Premium Bonds. There is a one in 54 opening of conquering a medal beside Lotto, compared next to a one in 24 chance of unbeaten a recompense with Premium Bonds. However, beside Premium Bonds, you retain your capital of £1 per enthralled and it can be nearly new in treble draws. With Lotto, each £1 worn-out on a mark is gone and the least prizes are inferior than Premium Bonds (£10).
Advantages & Disadvantages
To summarise, down are the advantages and disadvantages of investment in Premium Bonds:
Advantages:
- Chance of victorious a much than you have attained in interest
- Exciting Investment
- Prizes are tax-free
- Capital is retained
- Capital is untroubled (backed by HM Treasury)
Disadvantages:
- Poor excitement rate/prize fund
- Poor odds
My Decision
My of her own belief is that, having looked at the numbers in depth, the disadvantages far outgo the advantages, so I'll be cashing them in after the June 2007 exert a pull on has understood location. This is because the June draw is substance 5 £1 a million prizes instead of the standard 2. I may preserve a least amount (£100) in in that for the fun facet. I'll be exploitation the savings to execute one of - to expend £1000 in thing that will relinquish more than the most favourable monetary fund explanation.
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