Cash in on Premium Bonds

MANY of us harbour secret yearnings to become Lottery millionaires, often spending considerable amounts of money each week in the vain hope that our dream will come true. Yet it is possible to become an overnight millionaire without spending any money at all. Premium Bonds give you a monthly chance of scooping that lovely jackpot – and you can cash in your bonds whenever you like and get your entire stake back. That’s the best sort of gamble of them all.

Introduced in 1956 by Harold Macmillan as “something new for the saver of Great Britain”, Premium Bonds are effectively gilt-edged securities: you loan your money to the government and in return it pays you interest. Your capital is guaranteed to be returned and you can get your cash back within a fortnight at any time, with absolutely no risk.

Premium Bonds are becoming more and more popular. In the past 10 years there has been a seven-fold increase in the number of bonds in the draw. To cope with this increase, from June 2005, Premium Bonds will have 11 digits. Older Bonds have nine or 10 digits. The downside is that the chances of winning are poorer now than they have been in the past. Where Premium Bonds differ from normal bonds is that the interest payments – 2.15 per cent a year – are pooled and paid out as prize money to the winners of the monthly draw.

With 23 million bondholders holding £25 billion worth of Premium Bonds nationwide, they are one of Britain’s financial success stories. They are a fun, yet serious way of saving, combining the chance of winning tax-free prizes with the peace of mind of knowing your capital is secure.

The monthly draw offers a £1 million jackpot plus over one million other cash prizes. In July 2004, the winner of the £1 million jackpot had just £17 in Premium Bonds, purchased in 1959, and eight of the last 12 jackpot winners held less than the £30,000 maximum. The more bonds held, the better the chances of winning, but this doesn’t mean prizes are won exclusively by higher value holdings.

As well as the jackpot, you can win anything from £50 to £100,000 for each bond number you hold. Each month’s prize fund is equal to one month’s interest on the total value of all eligible bonds. The interest rate used to calculate the prize fund, the share of prize fund allocated to each prize band and the odds of winning are all variable, so they may change from time to time.

The easiest way to build up your investment and increase your chances of winning is to buy Premium Bonds monthly by standing order. Once you’ve made your first purchase – on the internet, by telephone, by post or at a Post Office branch – you will be sent details of how to start investing regularly. If you already hold Premium Bonds, call 0845 964 5000 for details.

In the almost 50 years since their inception, Premium Bonds have handed out 104 million separate prizes with a total cash value of £6.7 billion. According to National Savings, over 23 million people in the UK hold Premium Bonds and, currently, there are 21 billion separate bonds in each monthly draw. Everyone is contacted automatically when they win a prize.

But there are occasions when people have moved and not notified National Savings leaving the organisation to look after 400,000 unclaimed prizes worth a total of £23m. The good news is there is no time limit on claiming prizes if the bond holder is alive. But, unlike other NS&I savings plans, most Premium Bond prizes have to be claimed within 12 months of the holder’s death.

If you think you may have won, you can request a claim form either by phone, on 0845 9645000 or at the website, www.nsandi.com

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