Finance: Expert on impact of inflation on savings accounts
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Launched in the 1950s by NS&I, Premium Bonds are savings accounts which have been popular with many Britons across the country.
As a savings institution backed by the Government, deposits with Premium Bonds are 100 percent protected from any potential harm.
This type of account allows savers to withdraw and deposit money whenever they want, however interest is determined by a monthly prize draw.
Among the largest amounts someone can win through said prize draw is either £1million, £100,000, £50,000 or £25,000.
Currently, interest for Premium Bonds is set at one percent, but this subject to change depending on movements in the wider economy.
At the start of each month, the Premium Bonds prize winners are announced, with the next winners being confirmed on September 2, 2021.
Ahead of this date, many Britons will be looking for advice and guidance on improving their chances of winning before NS&I announces the results.
Through Premium Bonds, savers can buy £1 bonds, and each bond has an equal chance of winning. Following this method, the more someone buys, the more their chances improve. However, Britons should not buy outside their means.
As of February 2019, the minimum bond someone can hold is worth £17, however savers buy up to £50,000 if they wish.
The winning numbers for the NS&I’s lottery is determined by a machine, which is called Electronic Random Number Indicator Equipment or commonly known as ERNIE.
Usually, only two lucky Premium Bonds account holders win the lottery’s £1million jackpot a month.
In order to be one of the very fortunate few jackpot winners, many look to NS&I for advice on improving their chances in the draw.
Thanks to the financial institutions’s Frequently Asked Questions (FAQ) webpage, the NS&I does offer some guidance to those eager to win.
One of the most commonly asked questions to NS&I regarding Premium Bonds is whether bonds which are bought close to the draw are more likely to win.
Many ask this question as the majority of winning Premium Bonds have been winning numbers bought since the turn of the millennium, despite the prize draw being much older than that.
In response to this query, the NS&I states: “Each £1 Bond number has an equal chance of winning, regardless of when or where it was bought.
“Over 95 percent of eligible Premium Bonds have been bought since the year 2000.
“So even though Premium Bonds have been on sale for over 60 years, this is why newer Bonds seem to win more frequently.
“When ERNIE randomly generates winners, it doesn’t store any numbers, so there’s no way any Bonds can be left out.
“In 2004, the £1million jackpot was won by a customer with only a £17 holding, who bought them in 1959.”
As of today, the odds of someone winning the £1milllion jackpot prize draw in Premium Bonds is 34,500 to 1 – for every £1 bond.
Savers are encouraged to invest Premium Bonds as the winnings are tax-free, which is a major incentive for those looking to take the top prize.
On moneysavingsexpert.com, Martin Lewis outlined who Premium Bonds are ideal for as a means of saving and investment.
He said: “Premium Bonds are all about your mentality. They do protect your cash, so even if the returns don’t look like a good bet, it’s fine to put a non-significant portion of your money in them, provided you’re aware it’s more for fun than returns.
“Before deciding, use the calculator to look at the real odds. If you’re willing to take the gamble after that, then it’s fine.
“Many people often think: “I’m likely to get about one percent and there’s a small chance of winning a million’.
“But the main point is that this isn’t correct. You’re actually likely to get less than one percent, and there’s a negligible chance of winning a million.
“If you know and you’re okay with this, then investing in Premium Bonds isn’t a bad plan.”
Before investing in Premium Bonds, savers must be aware they are never guaranteed to win any prize money.
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