Premium Bonds to have bimonthly £1m jackpots from August |
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Published
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Sun, 19 Jun 2005 16:05
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The National Savings and Investments have announced that it would be adding a second monthly jackpot to the existing one of £1m from August. This means that owners of Premium Bonds will have two opportunities in a month to scoop up the £1m jackpot.
National Savings said that it was able to introduce the second jackpot after people had put in billions into its schemes. Current holdings at the National Savings top £26bn. This is almost nine times the amount since the £1m first prize was introduced in April 1994. At that time only £3.7bn was held in bonds. Investors are becoming increasingly disillusioned with the low interest rates being offered by banks and are turning to the Premium Bonds in a big way. Just this week Alliance & Leicester affected a 0.35 percentage points cut and brought its rate down to 5 percent, while HSBC cut the rates on its savings accounts by a quarter point.
The banks have gone ahead with the rate cuts even though Bank of England rate has remained unchanged since October 2004. Commenting on these rate cuts, Sue Hannums, of Chase de Vere Financial Solutions, the independent financial adviser (IFA), says, “Getting in a sneaky rate cut before any movement in the base rate seems very unfair to me. I will be keeping a very close eye on these institutions, which will no doubt lower their rates again if there is a cut in the base rate in the near future.”
| No wonder then that people are looking to try their luck on the Premium Bonds. Another attraction to investors is that the price money happens to be tax-free. Also the fact that the Premium Bond prize fund rate is set to increase from 3.2 percent to 3.25 percent should attract many more investors. Paul Ilott, of Bates’ Investment Services, an IFA, says: “Higher-rate taxpayers who aren’t banking on a specified return on their money, and who have more than £3,000 to invest, should consider Premium Bonds. Although the average likely yearly payout rate of 3.25 per cent is lower than the top rates available from some other NS&I products, the Premium Bond prize money is tax-free. The downside is that it is still a gamble — I occasionally meet people who have been unlucky enough never to have won a prize despite holding Premium Bonds for many years.”
He is absolutely right as 23 million Bond holders consider the Premium bonds as an essential part of their portfolio. But Ms Hannums cautions, “This is a positive move, but it lacks the wow factor because the chances of winning the jackpot are still very slim. The extra £2 million a month is just a drop in the ocean to NS&I,” she pointed out.
Investors who want to be eligible for the August double draw must buy their bonds before the end of June.
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