Premium Bonds from the National Savings and Investments (NS&I), are a popular savings vehicle to help boost retirement income. Each Premium Bond costs £1 and an individual can purchase a minimum of £100 worth, or £50 if a standing order is created.
Instead of earning interest on money that you save via Premium Bonds, you are entered into a monthly prize draw where you can win between £25 to £1million. Your chances of winning on any one Premium Bond are equivalent to a 1.3% interest rate and any prizes that you do win are tax-free.
In September 2013, we informed you about the changes made to the Premium Bonds, including the fall in interest rates, as well as the drop in prizes. However, this month, we bring some good news for Premium Bond lovers.
Previously, the maximum sum an individual could invest in Premium Bonds was only £30,000. This has now been increased to £40,000, which is the first change since 2003, when the maximum investment went up from £20,000 to £30,000.
Since the increase, enquiries have been 30% higher than before and in total, almost £50 billion has been invested in Premium Bonds.
The NS&I have also announced that from August 2014, there will be an additional £1m jackpot paid out monthly. This could mean that some other prizes will be discarded to make way for the additional top prize. Currently, each month, the £1m prize is allocated first, any money left after this is split among the remaining high value, medium value and low value prizes. So presumably, if there are two £1m jackpots, there will be less money to go around the other prizes. However, the NS&I have not yet stated that this will change from August.
The odds of winning a prize on any one bond is the same as it was before, 1 in 26,000, which is for any win, not just the jackpot. However, the more individual bonds you own, the higher your chance of winning a prize.
Next year, to help boost retirement savings further, the NS&I plan to launch pensioner bonds, which will offer higher rates compared to other pension schemes currently offered by banks and building societies.