From June, the amount of money savers can stash in Premium Bonds will jump from £40,000 to £50,000.
It’s the latest in a series of changes that have led to Premium Bonds appearing a more attractive bet for savers, with billions of pounds flooding in. So should you put more money into Premium Bonds?
How Premium Bonds work
With Premium Bonds, you can save anything from £100 upwards, and enjoy easy access to your money.
However, they don’t pay any interest. Instead there is a monthly prize draw, where winners will pocket tax-free prizes of between £25 and £1 million.
For every £1 you invest in a Premium Bond, you get a unique bond number. The winning numbers are then selected by the Electronic Random Number Indicator Equipment, or ERNIE as it’s better known. Each bond number has exactly the same chance of winning – 26,000-1.
Each month we publish the big winning Premium Bond numbers here on loveMONEY.
Why Premium Bonds are looking more attractive
Since last June, £6 billion has been put into new Premium Bonds according to National Savings & Investments (NS&I) which operates the bonds.
That influx can be partially explained by the fact that in June the maximum amount you could hold in Premium Bonds increased from £30,000 to £40,000.
[SPOTLIGHT]It’s not just the amount that you can save in Premium Bonds that’s rising though – last year also saw the number of prizes increased. Now two people every month will pocket the top prize of £1 million, while the number of prizes across the board has jumped by more than 50,000. The exact number of prizes each month varies, depending on how many bonds are eligible for a prize.
The pros and cons of Premium Bonds
There are a number of positives to Premium Bonds. If you do win any of the prizes, that money is absolutely tax free.
There’s also the fact that your money is entirely protected by the Treasury. Any money you save in Premium Bonds is entirely safe.
However, it’s worth remembering that thanks to the Financial Services Compensation Scheme (FSCS), the first £85,000 you save in participating institutions (essentially all banks and building societies) are protected too. What’s more, at least with those accounts you are guaranteed a return, rather than the luck of the draw.
If you want to secure a more consistent return on your money, read Where to earn most interest on your cash.