Can I buy Premium Bonds as Christmas presents for my family?
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I’ve been thinking about giving members of my family Premium Bonds as Christmas presents this year. Are they a good investment? Can I buy them for all the family, including children?
Douglas Bridges of Smith & Pinching responds:
Premium Bonds are a firm favourite for many investors. Although they don’t earn interest or have any guarantees of a return, there is always a chance that you could win £1 million each month.
The first thing to say is that Premium Bonds are a secure investment. They are from NS&I (formerly National Savings & Investments) and are government-backed. However, you must bear in mind that if you take inflation into account, they will lose value in terms of purchasing power from year to year.
There are a few things you need to know about Premium Bonds. Firstly, you can only buy them for someone else if the recipient is under the age of 16 – other family members will have to buy them for themselves. You can buy them for any child, not just for your own children or grandchildren. Buying Premium Bonds for children can be done online or by post.
Each bondholder is limited to a total of £50,000 in Premium Bonds and the minimum holding is £25. You can manage your holding by opening an online account with NS&I and their website (www.nsandi.com) offers you the chance to manage any of the products you have bought. If you’re buying for a child, you must nominate a parent or guardian to manage their bonds for them. You must get the nominated parent or guardian’s consent before you buy the bonds.
Adults can cash in their Premium Bonds whenever they want – but bonds held by a child under 16 can only be accessed by the nominated parent or guardian.
A random draw is held at the beginning of every month and prizes are awarded. There are two £1 million prizes, then a number of smaller prizes ranging from £100,000 to £25. The prize fund rate is 1pc of the fund. NS&I tells us that the odds of winning a £1 million prize is 34,500:1 for every £1 bond. Prizes are tax-free.
I’m sure your family members will be delighted to receive the money to buy Premium Bonds this Christmas, but do check with them as they may already hold the maximum allocation or have other preferred investment routes.
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Any opinions expressed in this article do not constitute advice. The value of an investment and the income from it could go down as well as up. The return at the end of the investment period is not guaranteed and you may get back less than you originally invested.
For more information, please visit www.smith-pinching.co.uk