Back in May ending time period I endowed £1000 in Premium Bonds. So far, I've won nix and lifeless have my £1000 deserving of bonds. My stratagem was to support them for 12 months formerly re-assessing whether I should maintain them or not. This nonfictional prose will handle the advantages and disadvantages of Premium Bonds as an share vehicle and reason out next to my outcome.
How They Work
Basically, the unit of time excitement earned on every Premimum Bond is lumped both to cause the reward fund. Then, a repayment pull towards you takes set down mistreatment a data processor (ERNIE), which unpredictably picks the winners.
The Details
To be suitable to purchase Premium Bonds, you must be at tiniest 16 years old and essential put at least possible £100 (or £50 via a rule-governed straight dictation). Premium Bonds can be bought as a gift for a toddler underneath 16 by their parents and grandparents. The record that can be invested in Premium Bonds is £30,000.
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Premium Bonds are provided by National Savings & Investments, which are hardcover by HM Treasury so your wealth is especially innocuous.
The Numbers
According to the website, at hand are now £26 Billion worthy of bonds issued. The seasoning charge utilised in the computation of the gift monetary fund is 3.60% (from February 2007), within are 1,417,836 prizes all month and the full prize monetary fund values £102.1 Million.
Prizes are tax-free and reach linking £50 and £1,000,000.
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Chance of Winning
National Savings & Investments enumerate that the unpredictability of in the lead (any) compensation is one in 24'000 per devotion. Using the other figures on their website (1'417'836 prizes and 26 billion bonds), I work out that location is a one in 18'338 kismet of in the lead thing per in bondage though it's charge noting that these information may be out of mean solar day. Obviously they can't tidings the numeral all instance a sticking to is sold :)
It is too meriting noting that should you win, you unmoving only have a one in 708'918 destiny of successful a million, devising the likelihood of grabbing the big gift complete one in 17 cardinal.
How Does It Compare to the National Lottery
The National Lottery (or Lotto, as it is now titled) gives all card a one in 14 million casual of conquering the jackpot, which is frequently at least possible a a million. This compares next to a one in 17 cardinal indiscriminate near Premium Bonds. There is a one in 54 destiny of in the lead a prime with Lotto, compared with a one in 24 coincidence of victorious a prize beside Premium Bonds. However, beside Premium Bonds, you hold your possessions of £1 per sticking together and it can be in use in quaternate draws. With Lotto, each £1 dog-tired on a commercial instrument is squandered and the littlest prizes are belittle than Premium Bonds (£10).
Advantages & Disadvantages
To summarise, beneath are the advantages and disadvantages of finance in Premium Bonds:
Advantages:
- Chance of leading a more than than you have earned in interest
- Exciting Investment
- Prizes are tax-free
- Capital is retained
- Capital is unafraid (backed by HM Treasury)
Disadvantages:
- Poor colour rate/prize fund
- Poor odds
My Decision
My of her own inference is that, having looked at the numbers in depth, the disadvantages far exceed the advantages, so I'll be cashing them in after the June 2007 mark out has interpreted point. This is because the June magnetize is subject matter 5 £1 a million prizes alternatively of the customary 2. I may maintain a borderline amount (£100) in there for the fun facet. I'll be exploitation the currency to fulfill one of - to spend £1000 in something that will give up much than the leaders monetary fund article.
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