{"id":1023,"date":"2019-04-17T09:43:45","date_gmt":"2019-04-17T08:43:45","guid":{"rendered":"https:\/\/arkenstonewealth.co.uk\/?p=1023"},"modified":"2019-04-17T09:43:45","modified_gmt":"2019-04-17T08:43:45","slug":"premium-bonds-what-are-they-and-should-you-purchase-them","status":"publish","type":"post","link":"https:\/\/www.arkenstonewealth.co.uk\/blog\/premium-bonds-what-are-they-and-should-you-purchase-them\/","title":{"rendered":"Premium Bonds: What are they and should you purchase them?"},"content":{"rendered":"

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Premium Bonds have been around since 1956 but they\u2019ve recently been in the headlines again after the technology behind the popular saving option has been revamped. But before you put your hand in your pocket, it\u2019s crucial to understand what Premium Bonds are and how they can potentially offer you a return.<\/p>\n

Firstly, despite the name, Premium Bonds differ significantly from standard bonds. A bond represents a loan, with the investor receiving specified repayments over a defined period of time, interest may be variable or fixed. They are used by companies, governments and other organisations to raise capital. Premium bonds, on the other hand, are an investment product that doesn\u2019t deliver interest or dividend income. Instead, you\u2019re entered into a prize draw to receive tax-free cash each month.<\/p>\n

Introduced over six decades ago by the then Chancellor, and later Prime Minister, Harold Macmillan, Premium Bonds have paid out prizes totalling more than \u00a319 billion. The product was conceived to encourage more people to set savings aside, with the incentive of potentially securing a life-changing, tax-free prize in the process. It\u2019s a strategy that worked, thousands of people use the NS&I product to save.<\/p>\n

The evolution of ERNIE<\/strong><\/p>\n

The distribution of the prizes falls to ERNIE; the Electronic Random Number Indicator Equipment.<\/p>\n

Every month, ERNIE is fired up and picks which lucky Premium Bonds will win a prize, ranging from \u00a325 to \u00a31 million. The investment product\u2019s recent attention is down to the latest reincarnation of ERNIE being unveiled. Back in the 50s, the original ERNIE was almost the size of a room and took three days to select the random winners. Today, ERNIE 5 is the size of a pea and uses quantum computing to draw three million winners in just 12 minutes.<\/p>\n

Since the launch of Premium Bonds, various other products offering cash prizes have launched, such as the National Lottery. But where Premium Bonds differ is that you can withdraw your initial investment, backed by a Government guarantee.<\/p>\n

What else do you need to know?<\/strong><\/p>\n

First, for every \u00a31 you invest in Premium Bonds, you\u2019re given a unique number. This is the number you\u2019ll hope ERNIE picks out. As a result, the more money you place in Premium Bonds the greater your chances of winning. NS&I lists the annual prize fund interest rate at 1.4%, but this will vary hugely between different people and even each year on the same Bonds. The odds of winning with a single \u00a31 bond number is 24,500 to 1.<\/p>\n