Investing in bonds is a common way to make a guaranteed return on your money. But ordinary bonds pay out only a fixed rate of interest, which will rise or fall according to the interest rate set by the government. So, what happens if you would like to earn more than the fixed rate of interest offered by a conventional bond? Well, then you need to buy what are known as premium bonds.
A traditional way of saving money is premium bonds where you have the opportunity to win a prize in the regular draws.
How to buy premium bonds
A Premium Bond is a government saving and investment product, usually offered by National Savings and Investments (NS&I) in the United Kingdom. Premium Bonds are issued by the government and are considered to be low-risk investments. They offer a fixed rate of interest, which is paid every month. You can buy them using their secure online system on their main website which is the quickest way to purchase premium bonds.
You also have the option to call the MS&I team to buy your bonds over the phone and you’ll need your bank card details prepared for the call to purchase the premium bonds. Their line is always open throughout the year (265 days a year – 24 hours a day).
Finally, you can purchase your premium bonds through the post with a cheque. This involves completing the application form, attaching the payment to the form and sending it to the main address. The two different forms that you can use include a form for buying the bond for your child who is under 16 years old and another form for if you’re buying for your grandchild or great-grandchild that is under the age of 16. For both forms, you’ll need to buy a minimum of £25 worth of premium bonds.
Additionally, for a child who already has premium bonds in their name, you can also buy via bank transfer or standing order.
The thing that attracts many people to premium bonds is the chance to win a prize in their regular draws. You will need to register online to check your bonds and see whether you have won any prizes.
You can choose to purchase bonds via post and receive a written confirmation every time to buy bonds. You also have the option to go paperless for this. You will need the holder’s number which links all your owned premium bonds. The NS&I number is different because it is issued for online or phone access.
Is it worth getting premium bonds?
If looking to decide between premium bonds and money-saving accounts, there are a few things to think about. The other savings accounts don’t offer a chance to win a £1 million jackpot prize which is drawn every month as well as numerous other cash prizes. They are ideal if you want 100% security and you want to take advantage of the tax-free investment opportunities.
On the other hand, premium bonds may not be ideal for you if you want a regular income and are worried about inflation eroding savings. Additionally, if you want a guaranteed return on investment, they most likely won’t be the best option for you.