IF YOU have a Premium Bond to your name, you will soon have two chances to strike it rich. National Savings & Investments (NS&I), the government-backed savings institution, has launched a second £1 million top prize from August.
This will mean that the 23 million Premium Bond holders will have their chances of hitting the jackpot whittled down to 13 billion to 1 for each bond held. But Premium Bonds are not just another way to participate in the popular national pastime of gambling. They also offer a tax-free savings return and can fit in well with a balanced portfolio. Times Money suggests ten things you need to know.
1 How much can I invest?
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You need only £100 to get started, with the maximum investment capped at £30,000. Each £1 invested buys a unique number in the monthly draw.
2 What are my chances of getting lucky?
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If you have the maximum £30,000 holding, the odds of winning a £1 million jackpot improve to 445,282-1 from this August. However, there are 1.1 million other prizes to be had, worth between £50 and £100,000. The chance of one bond winning the minimum £50 prize stands at 24,000-1. NS&I says that a £10,000 bond holder can expect to win five tax-free prizes a year.
3 What return will I receive?
With average luck, Premium Bonds should pay a return equivalent to an interest rate of 3.25 per cent. But the tax-free status lifts that to 4.06 per cent for basic-rate taxpayers and 5.42 per cent for higher-rate taxpayers.
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4 How do I buy them?
Bonds can be purchased at the nation’s 15,000 post offices, by phone and over the internet at www.nationalsavings.co.uk.
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5 What type of saver is suitable?
Premium Bonds are the quintessential populist financial product. The winner of the July jackpot last year illustrates the romance of the savings scheme. A pensioner from East London won the £1 million prize on the back of £17 of bonds bought in 1959.
But the tax-free status of Premium Bonds makes them suitable across a whole spectrum of investors. Business is brisk at the City of London’s Post Office branch, with high rollers making the most of their £30,000 entitlement.
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6 What happens if I win?
Agent Million: a specially trained bearer of good news will call at your home. From August, there will be two agents of good news: Agent M1 and Agent M2.
7 What do I do if I think I may be eligible for an unclaimed prize?
If you have yet to collect your winnings, you are not alone. There are 400,000 unclaimed Premium Bond prizes worth £23 million. You can visit the NS&I website to find out if some of this unclaimed money is yours.
8 Why is so much money unclaimed?
NS&I blames savers for failing to provide it with up-to-date contact details when they move home. Unclaimed winnings are kept in Treasury coffers. NS&I research found that one in six people fails to alert financial services providers when they move home.
9 Who is Ernie?
Ernie, short for electronic random number indicator equipment, is the machine that generates the winning numbers. The current Ernie lives in Blackpool and is the fourth model. It was unveiled at the Science Museum last year.
10 Should I just play the national lottery instead?
The chances of winning the lottery are much higher: a £1 Lotto ticket has a 57-1 chance of winning a £10 prize. But you do not keep your losing stake, or, if you are a grandparent, have the satisfaction of knowing that a bond purchased for a grandchild could win him or her £1 million in the future.
JOE MORGAN