The amount you can stash away in Premium Bonds is climbing to £50,000 on Monday. That may be beyond your pocket – it's certainly beyond mine – but it's a reminder of the government-backed scheme that hands over two £1m jackpots.
In all, £60m is paid out to 2 million winners each month. The bulk of the prizes are for £25, although there are awards of £100,000, £50,000, £25,000 and £10,000. The odds of winning any prize are high at 26,000 to 1. But all are paid tax-free.
Sound tempting? Experts are divided about the attractions of the bonds. "I think of them as fun money for those with quite a bit of wealth," said Mark Dampier of the adviser Hargreaves Lansdown. "It's a bit of fun to think that you might have won £1m when a prize-winning envelope arrives. And with the returns so low at the moment in building society accounts, that extra bit of fun can make up for the interest you may lose out on.
"But for those with little savings, that extra interest may be crucial. If you're in this position and want a guarantee that your nest-egg will grow, you should be looking for the best-paying deposit accounts, not taking a risk."
Richard Bishop, lecturer in financial services at Coventry University College, added: "They're not for you if you want a regular income from your savings or have major concerns about the inflationary risk, because there's no guarantee of prizes. I think they're great for higher or additional- rate taxpayers who have used up all their annual tax-free Isa allowance. They're 100 per cent safe and all prizes are tax-free."
James Blower of Savings Guru is an out-and-out fan: "I think they are great as part of a portfolio and a much better way to gamble than the National Lottery, as your capital remains intact. The backing of the Treasury makes them safer than banks and they also have a great little app that allows you to see if you've won."
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