A challenger bank has launched a savings account that pays a fixed rate of interest as well as the chance to win the lottery every month.
The Lottery Bond from OakNorth Bank pays 0.5% interest, which isn't anything to get excited about, but to offset this low rate each month the bank will also buy a round of lottery tickets to give savers the chance to win big.
We take a at how it works and how it compares to Premium Bonds, the Halifax Savers Prize Draw and other ways to win something for nothing.
How it works
The OakNorth Bank Lottery Bond pays a fixed rate of 0.5% for nine months. You can open an account with £1,000 and save up to £100,000.
Once you’ve funded your account you will be placed into a Lottery Group, which will take part in a National Lottery draw each month.
The total funds deposited in your Lottery Group will determine the number of tickets purchased and you will get a proportional share of any winnings based on how much money you have saved in the account.
So, if you invested £35,000 and the total funds in your Lottery Group was £1 million you would get a 3.5% share of the winnings.
On a £5 million jackpot win that amounts to a £175,000 in your pocket!
Should your luck come in, you won’t have to worry about handing over a share to the taxman as lottery winnings are tax-free.
Odds of winning
The odds of winning the UK National Lottery jackpot by getting all six numbers with a single ticket is one in 45 million.
But you can improve your chances by buying more tickets and the OakNorth Bank effectively makes you part of a big syndicate that does just that.
For every £40,000 that is invested in a Lottery Group, OakNorth will buy 10 lottery tickets over the nine scheduled draws for your Lottery Group.
So if you were in a Lottery Group that had £1 million invested, OakNorth would purchase 250 tickets over the nine-month period. That's the equivalent of £500, or 0.05% of the sum invested.
How it compares to Premium Bonds
OakNorth Bank isn’t the first savings account to offer savings with a thrill.
Premium Bonds – the UK’s favourite savings account – has been doing it since June 1957. It offers investors the chance to win thousands of tax-free prizes each month with two top prizes of £1 million per draw.
So how does the Lottery Bond stack up?
With OakNorth Bank you can invest from £1,000 to £100,000 and have no access to your cash for nine months.
In contrast, you can you can invest from £100 to £50,000 with Premium Bonds, but you can access your cash whenever you want.
The odds of winning any prize with the National Lottery is one in 10 but the chance of one £1 Premium Bond winning a prize in any given month is one in 30,000.
Also Premium Bonds, unlike the Lottery Bond, don’t pay interest on your savings, so there is a chance you’ll get nothing in return no matter how long you leave the money invested.
However, the Premium Bond prize rate (essentially the interest rate), is set at 1.15%, so it is more generous than the OakNorth offering in that sense.
How it compares to the Halifax Savers Prize Draw
Halifax has run a prize draw for savers since December 2011.
It gives away 1,103 cash prizes (1,605 in the June Superdraw) every month to eligible savers who have registered, with three top prizes of £100,000 (with an extra two of £500,000 in June).
To be eligible you need to be over 18, live in England, Scotland or Wales and have kept at least £5,000 in a qualifying account for the full calendar month before the draw.
Like OakNorth Bank you can earn interest from your savings account and be entered into a draw to win a big prize as a bonus.
Halifax doesn’t reveal the odds on its Savers Prize Draw so it’s hard to compare with Premium Bonds or the OakNorth Bank Lottery Bond.
However, the odds don’t change. You only get one entry into the prize draw no matter the number of savings accounts or how much you have saved.
Other ways to earn interest and play to win big
The TSB Plus Current Account offers 3% on savings up to £1,500 and pays £10 cashback each month.
You’ll get £5 cashback so long as you have two Direct Debits set up and a further £5 every month that you make at least 20 payments with your debit card and pay in £500 a month.
So, you could potentially buy 10 lottery tickets yourself with the cashback you earn from this account and pocket £45 from the account in interest.
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