Premium bonds celebrated their 60th anniversary last year and even to this day they have remained as popular as ever And, it’s not hard to see that what they offer is closer to a lottery ticket than a viable investment opportunity.
More chance of winning the Lottery
The chances of winning the jackpot is 26 million to one, and as all the interest generated in money invested goes to the prize fund you won’t see much if any return on your investment unless you are one of the lucky few to bag a big prize.
However, Ernie is set to become even less generous later this year, when the chances of winning the bigger prizes will become slimmer still. National Savings and Investments (NS&I) has announced that from May 2017, the estimated number of tax-free £100,000 prizes will fall from three per month to just two.
And the £25,000 prizes will also be reduced, going from eleven to nine each month. The amount of monthly £10,000, £5,000 and £1,000 prizes is also set to go down with the total prize fund shrinking from £69.5 million to £63.8 million.
The reductions are due to NS&I making cuts across a range of saving products to reflect market conditions. Direct ISA and Direct Saver accounts will see interest rates cut from 1% to 0.75% and 0.8% to 0.7% respectively at the same time.
Whilst a drop in the number of big prizes is undoubtedly a disappointment for savers, the changes do little to change the positives and negatives of premium bonds overall. As an investment opportunity, they offer no guarantees but the fact that any money put in is backed by the treasury means your investment is fully protected. If you like it is a safe place for some of your money.
Some good news around the corner
It’s not all doom and gloom for NS&I products, however. Last November, Chancellor Philip Hammond announced a new savings bond would become available in spring 2017, offering what was described as a “market-leading” rate of approximately 2.2%. The precise rate is set to be confirmed soon, and the three-year bond will be available for anyone over 16, allowing them to invest up to £3,000.
If you or your family would like to talk us about your financial plans for future, please get in touch for a no-obligation meeting. Go to our website www.miadvice.co.uk and contact us via our “Get in touch” form on our home page or Contact Martin Dodd on 01902 742221.
Email us at email@example.com
It is advisable to take advice from a professional financial adviser when making major financial decisions.
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This article has been prepared in good faith and based on Midlands Investment Agency’s understanding of the law and interpretation thereof at the time of creation. The contents should not be regarded as specific advice and we always recommend that specific advice is sort from a qualified professional. No responsibility can be accepted by Martin Dodd or Midlands Investment Agency Ltd., for any loss that may occur by a person acting or refraining from acting on the basis of this article.