Monday, April 7, 2008

The True Value of Premium Bonds

When an investment instrument that sounds to good to be true, controversy always arise. Taken into the odds of winning per bond and the interest rates for bank saving accounts, your argument can be on either side. If you look at premium bonds, an investor can probably win a million pounds during the draw. What about the other side of the coin? 36 billions people don't get to win any single cent. Although the money you put in stay same and you don't have any fear of losing your money, but then you don't get to earn any interest. The truth is that the British government has all the access to 6 billion pounds without paying any interest except to spend more a million dollar pounds for the cash prizes every twice a month. This is less than 0.1 percent of the total money invested.

You can see why some people are questioning whether or not premium bonds are good investment. Furthermore, the odds of winning declines when there are too many bondholders. This explain why most of the investors have little chance of winning the cash money. They also lose the potential to make money because they can't earn money like the saving accounts. They can make more money if they buy shares.

Let us look closely at the premium bonds. Supposing there are one million investors who own one bond per person. If one win the grand prize, then it means 999,999 investors will be the losers. These group of people can make some money should they put their money in the saving accounts. Therefore, you can choose a chance to win one million pounds or a guaranteed small return.

You can study the interest rate for each bond. The interest rate for payout of one pound bond is estimated to be 4 percent. This is the interest rate used to allocate the prize money. In other word, you should get 4 pounds for every 100 pounds you invested. This doesn't make sense because the cash value for the smallest prize is 50 pounds. This means 7 investors will lose their interest in that month if you won the 50 pound cash prize. So, more people will lose their money because they contribute 2 million pounds to two winners.

You decide if you want to invest your money premium bonds. There are other options. You have choices and only you can make the choice. It is the element of gambling which get people excited even they know the odds of winning are small. Saving accounts may not offer any thrill but you know that at the end of the day you will get your return even though it is small.

Claim Your Winning Premium Bonds Prizes

Premium bonds offer an opportunity to win cash prizes. Imagine if you have won 1,000,000 pounds. What would you do with that kind of money?

A unique number is printed on every bond. The number will be kept along with all the numbers which have been issued. They are entered into automatic number generator which gives out the winning numbers every month. The cash prizes are ranged from 50 to a million pounds. With the ownership of these bonds, you stand a chance to be a winner for the whole year. Don't you think it is better to put your money in these funds instead of your bank saving account which offer meagre returns?

There are cases where no one step forward to claim the prize money. Why are there unclaimed premium bond prizes? One of the possibilities is that they are not aware that they have won the prize. Another reason could be they have not informed the National Savings and Investment (NSI) agency about their new addresses when they move. Usually after the draw, the agency will notify the winners by mail. If nobody claim the winning prize, the agency will hold the money until someone comes forward and claim it.

Many investors do not know how to claim their money. You just need to know the right places to find it. The National Savings and Investment (NS&I) usually offer this information on the Internet. Unclaimed prizes are announced in the form of lists. You can do a simple search at premium bond prize checker to determine whether you are the past winner or in some circumstances, your prize may be pending. This service is free. You only need to enter your bond numbers and in a few seconds, you will know if you win any prize. If you find out that you are the winner, you can claim the money by presenting your bonds to the agency. Without the bond, no one can touch the money even if they know the bond number. Therefore, never lose the bonds and always keep them in a safe place.

When you buy the bond for the first time, you are given a unique code. This code represents your bondholder number. It also holds all your bond numbers. In case you forget your the number, try to recall the number given you when you buy your first premium bond. The code will carry 8 digits followed by a letter. The bond numbers will contain alphabets in the numbering sequences and these numbers will not follow the same sequence. This will help you to differentiate between your bondholder code and your bond numbers.

With most online bondholder checking services, the list of prizes is updated on a regular basis. Always remember your bondholder number because this is what is needed if you want to do a search online. If you have a hundred premium bonds, you only need to remember one number. After entering the number, you will receive an email which is sent by the service provider, informing you the result. With such a system in place, even if you move, you can still receive the email. Thus, if you are out of the country, you can still check the results online and have the results emailed to you. The service providers will look into the database for new and past numbers. In the few days, you will know if you have won the prize money.

NS & I Premium Bonds

The idea of premium bonds were first came about in 1861. The purpose of these funds is to help the commoners to save and invest their money for the protection in the event of accident or death. It was formerly known as the Post Office Saving Bank. People started to buy more notes. The Chancellor needed money for the public projects and he received financial help through the funds. In this way, the premium bonds began to serve a dual purpose.

It was a secure investment for the people. They don't need to be afraid the funds go bankrupt or depreciate in value. On the other hand, it served as a source of funding for the government when the taxes and other financial instruments are insufficient.

The Post Office Bank issued saving certificates along with the lottery system. In 1957, they released the lottery once a month to encourage more personal investment from the British citizens. The Treasury Department took over the management of the bonds from the Post Office management in 1967. The Post Office Saving Bank was changed to the National Savings and Investment (NS & I). The Post Office from then on supplied most of the premium bonds to the public.

The NSI has two functions; source of other investments and premium bonds. In 1996, the Post Office turned into the store of the agency. By then the National Savings and Investment worked closely with the Chancellor. Anyone who want to invest in this fund will drop by any post office and spend 100 pounds for the purchase of a bond. The maximum investment for each person is 30,000 pounds.

In 1999, Siemens Corp joined the agency. The modernization of the agency began when the Siemens schools of business trained more than 4000 workers of the agency in the area of investment strategies. They became more professional in the delivery of the investment services. The agency increased the number of call centers and engaged new computer technology in managing the investment portfolios. The contract between Siemens and the National Savings and Investments will be terminated in 2014. Hopefully by then, the agency will be able to run the operation on its own.

The training has helped the employees to improve the customer service and to attract more investment opportunities. The Internet helped in better communication between them and the customers. The National Savings and Investment (NS&I) will offer better services to their customer as more people are beginning to invest their money in premium bonds.

For the last ten year, this fund has bloomed tremendously. If the growth is poor, then you will enjoy a higher probability of winning the draw. According to statistics, as the population increases, it decreases the odds on getting your number selected. During the bad times, many investors will switch their investment to traditional low interest saving accounts. Therefore, this will reduce the number of premium bonds in the market which will increase your chances of winning.

Premium Bonds Facts

Apart from savings, premium bonds also offer the opportunity of safe gambling. They are better than the traditional lotteries because you don't lose money if you don't win any prize. You can continue to try your luck every twice a month for as long as your bonds are still in your hands. You just invest once and you can play for a lifetime. Young or old can benefit from these bonds.

Every bond carries a unique number. A machine will collect all these numbers and then generate the winning numbers. Winners will receive cash prizes instead of interest. This is a secure investment because it is guaranteed by the government. You can also cash in whenever you want and you don't lose a single cent. You can only buy up to 30,000 pounds worth of bonds. The limit is to prevent large corporate bodies from buying in millions so that common people like you can stand a chance to win.

You can increase your chances of winning. If you have a lot of premium bonds, you can increase your odds of winning the grand prize which is worth one million pounds. With 30,000 bonds, your numbers will have a better odd which is 400,000 to 1. The more you save the better your future will be.

The selection of number is random. This means the more numbers you have in your hands, the higher your chances of winning the cash prize.

You can buy the bonds on the Internet or over the phone. Alternatively, you can visit your local post office to purchase them.

Three simple process: buy, save, and win. However, you are not guaranteed to win any cash prizes. These bonds are useful especially when you urgently need the money or you retire.

You need to be at least 16 years old before you can buy them. You can also buy for your children if you plan their education fund. It would be nice to have some money when you start your family provided you started saving at the early years.

The cash prizes are free of taxes. So, when you win 1,000,000 pounds, you get to keep all of them. You can use the money to pay for your college or settle debts. You can do anything with it. So, are you reading to invest in premium bonds? The smallest cash prize of 50 pounds is still something. Just look at the interest rate that your saving account is offering.

Premium Bonds Are Better Than Lottery

One of the uprising stars in the investment portfolio is premium bonds. Although many have place their money in these bonds, there are some quarters begin to doubt if they are a worthwhile investment. The first premium bond was brought into existence in 1956. The British government used this instrument to persuade the citizens to save money. Unlike any other security or treasury bond, it does not give any interest. Instead it offers cash prizes which are worth more than a million pounds. It provides opportunities to the lower income group to win one million pounds using a lottery. About 20 million people in UK hold at least one premium bond. This represents one third of the population. They can buy these bonds from the post office or the National Savings and Investment agencies.

When the interest rates drop, these bonds seem to be a secure avenue for investing. At the same time, investors will the excitement to win one million pounds in cash every twice a month. The top prizes are about 15% of the total prize money allocated. Another 15% is allocated for the mid range prizes while the remaining 70% goes into small prizes with the smallest that carries the value of 50 pounds.

A 50 pound prize is equivalent to a 500 percent return as each bond is one pound. Your chances of winning is 1 in 21,000 but as the bonds become more popular, the odds may turn against you.

You can start with 100 pounds but the cap is set at 30,000 pounds. The government guarantees your investment but not the odds of winning cash prizes. This guarantee allows you to sleep peacefully every night without worrying about losing your hard-earned saving.

The minimum age for an investor in premium bonds is 16. Many parents buy these monetary instruments for their children's education funds. If your children start investing early, they will appreciate the value of money. In addition, the possibilities of winning sufficient money in helping them to start life are great.

Using the same bond, you can continue to play the game as long as you like. It makes sense if you have more bonds, then your odds of winning get better. Since the prize money is tax-free, you can reinvest the money into the bonds again until you hit the limit of 30,000 pounds. However, during the last decade, the chance of winning has drop. This is due to the fact that the market has a lot of bonds which lower the probability of getting your number selected.

Nevertheless, you still have an upper hand compared to the American Lottery because you can use the same premium bonds over and over again. You can check online for the premium bond draw results. Should your numbers match the ones on the listing, then you contact them and claim your money. Till today more than 500,000 unclaimed prizes are sitting in the National Savings and Investment agency.

Premium Bonds For Non-British Citizens

For the British, premium bonds are the mostly sought after for the purpose of saving. The government will guarantee your money whether you invest 100 pounds or 30,000 pounds. They help the government to finance public projects. They also offer opportunities for the certificates owners to win cash prizes which worth more than a million dollar through the monthly lottery. Unlike other financial notes, you can cash in anytime. You also will get back the money which you invest if you don't win the lottery. Therefore, they are not only investment but also offer fun activities through cash prizes.

So, who is eligible to buy these bonds? As long as you are a resident in Great Britain with the minimum age of 16, you can invest in these saving funds. For the younger generation, they can start their own education fund. For the mature market, it offers a cushion during the bad times or prepares an good lifestyle after retiring.

You don't have to worry about losing your money. Moreover, you have a chance to win 50 to a million bond if your bond number is selected as the winner. In any month, there will be at least two investors who will turn into millionaires.

The postal regulation do not permit mailing of bonds or cash prizes. If you are not a British, you can still buy these bonds provided that you are willing to travel to Great Britain to buy them in person. You can buy directly from the post offices or the National Savings and Investment agency. If you happen to be the winner of the draw, then you need to plan a trip to Great Britain to collect your winning prize. Now when it comes to taxation, you would not be taxed for the cash prize in that country. However, you have to check with your own federal income tax and find out the amount of money you can bring back that is free of tax.

You can redeem the bond at the cash value without loss. As a non-British certificate holder, you may need money and you would travel to Great Britain to convert your bonds into cash. However, you may have to pay certain fees to carry your money back to your homeland. It depend on the amount. In addition, you may need to check the restriction on traveling with large amount of cash. Therefore, you can arrange with the local banks to have your money transfer to your account in your homeland.

You also need to consider the ups and downs of the currency pound. During the exchange of currencies, you may lose some money as the pounds appreciate. Therefore, you need to keep an eye on the money market closely so that you know when is the right time to cash in your bonds.

If you want to protect your investment, you can arrange an agreement with a British resident to buy the bonds on your behalf. When the purchase is made, your counterpart will own the title of the notes. You will have a legally binding agreement with the person so that you can redeem your bonds for cash or claim the money prizes. For the benefit of your counterpart, you will offer an agreed percentage of the prize money. In such cases, you should use a British lawyer and your own attorney of your country.

I hope this article will help those who want to invest in UK premium bonds. You don't have to be a resident in the United Kingdom to buy these notes. In fact, anyone can buy them provided you follow the regulations as laid out by the government of Great Britain.

Invest In Premium Bonds

As far as investment is concerned, many people prefer to put their money in saving bonds, real estate or stock market. If you have never heard of premium bonds, perhaps this will be the best time to consider them in your portfolio. They offer investment in a fun way. Looking at most bank savings, you are given a fixed interest rate. You don't make much money this way provided you have large funds to place in the savings. The low interest rate on a money market or saving accounts offers very little return which is not justified to purchase a larger home or a brand new car. If you want to redeem it, you may have lose the interest.

Investing in the stock market can exhilarating because you may heard that people make tons of money during the peak of the share prices. As you know the market don't stay high all the times.
A premium bond like the UK one will not give you any interest. But you have something better instead. You can participate in the lottery where you can probably win a million dollars every month. The grand prize of one million dollars are drawn twice a month along with other cash prizes.

Supposing you have invested 10,000 pounds, then your odd of winning is 19%. This can be translated into numerical figures for some people who prefer that way. It means that 1 in 21,000 stands a chance to win the cash prize. This is what make the premium bonds exciting. Unlike the saving accounts where you already know how much you are getting at the end of the day, these bonds provide the element of surprise and excitement.

These bonds are favorites among the British people. More than one third of the population buy these bonds. As you are aware of, the saving accounts and government bonds are fixed. Once you have agreed with the interest rate that they offer, it will stay that way no matter how the economic climate turns out to be. You will not get anything extra when the bank or government makes more money on these debt instruments. The problem with these notes is that you will lose the interest if you decide to redeem early. Usually these investment will only mature after 10 or 20 years. Some may be even longer.

On the other hand, you can redeem your money any time without losing the face value because there is not interest to profit from. Remember there is no guarantee in winning the cash prizes. All you have are the chances or possibilities to win. The smallest payout is anytime better than the interest rate that the bank or government offers you.

Ernie Premium Bonds

You don't receive any interest with premium bonds. But they offer something far better than the meagre interest rate. When you buy the bonds, you let them sit like in a saving account. Every month, you can try your chance at the lottery. If your bond number is selected, you will have a chance to win 1,000,000 pounds. Every month, they are giving away more than one and a half million cash prizes. The prizes range from 50 to 1,000,000 pounds. If you decide not to participate in the lottery, you can exchange the bonds for cash. This investment has attracted more than a third of the population in Great Britain.

The British system uses ERNIE to produce random numbers which have been keyed in when the bonds are issued. ERNIE has been in use since 1957. It generate the numbers by capturing the noise signal from an array of neon tubes which is equivalent to the size of a mini van. It can produce 2000 numbers per hour. The first hardware was used for 17 years before it was replaced with a newer number generator in 1972.

During the eighties, the computer age emerged. The advent of ERNIE 3 soon replaced the predecessor. It was as big as a personal computer but it is nothing compared to the computer today. ERNIE 3 was able to generate winning numbers in 6 hours. In 2004, ERNIE 4 took over and its speed was 500 times faster than the original model. Unlike the vious models which used noise signal from the neon tubes, ERNIE 4 relied on thermal noise. It can generate more than a million numbers in an hour.

About 100 employees will validate the numbers generated by the machine if they match the original bond numbers. If everything is in order, they will allocate the prizes accordingly.

Every month, they will check the machine for so that it doesn't produce invalid numbers. This also prevent any fraud or scam that may arise from the abuse of the machine. They have to keep the machine run properly because it involves more than one and a half million pounds in cash prizes.

Your investments pay off when you are announced as the winner depending on the order that your bond number is generated.

ERNIE gains some popularity that people send Christmas card to the machine. "Thick as Brick" a song written by Jethro Tull was sung in honour of ERNIE.

The magic of ERNIE, the premium bonds and the excitement of winning the cash prizes are the reasons why many British residents are willing to invest money in this investment program. In addition, the cash prizes if you win can easily beat the low interest rates of the saving accounts.

British and Canadian Premium Bonds

Premium bonds have become the most successful investment security in Great Britain. They offer opportunities to commoners to become a millionaire through lotteries with a starting investment of 50 pounds. Now many countries begin to adopt this investment strategy but not all of them are the same.

The British have more than 40 years of experience in this fund. Every month, two bondholders will win 1,000,000 pounds apart from the interest accrued from the bonds. Moreover, you are allowed to exchange your bonds for cash at any time without loss.

Following this model, the Canadian government has launched their own security which is very far different from the British one. They have added the compound interest into the bonds. Unlike the British premium bonds which offer no interest, the Canadian ones give their investors a guaranteed rate of return. This figure is higher than the interest offered by the common Canadian Savings bond. When you want to redeem your money, you can only do it once a year.

Although both bonds are distinctly differently, but they share a common attributes. Both of them are guaranteed by their governments. So, you can be almost certain that you will not lose your money unless the government collapses. These countries use the fund for the purpose to finance the public projects. Your investments help them to utilise the funds instead of the taxpayers' money. This can help to reduce taxation and save more money in the long term.

You don't have to pay any fee for both of these security notes. However, the Minister of Finance of Canada can stop the sale of bonds at any time. Presently, the UK government is still encouraging the public to buy more bonds. In fact, the growth of UK bonds continue to rise.

The only disadvantage of the British system is as more investors are involved, the chances of winning the cash the money diminish for each investor. That is to say, every investor will encounter a lower odd of winning when the market for the bonds flourishes. In addition, you are not guaranteed to win the prize but you will not lose your investment should you decide to withdraw it. For the investors in Canada, their return is secured

The UK premium bonds offer cash prizes through lotteries as return on investment while the premium bonds in Canada provide a fixed rate return of investment. Both of them are safe and secure investment. No doubt each of them is not perfect but they are excellent investment instruments that you can add into your portfolio. However, the portfolio in both of these bonds need to be diversified in order to satisfy the need of retirement planning. Certainly, they have proven to be an ideal opportunity outside the mainstream of certificate deposits or savings accounts which have been the mainstay of many financial institutions.

Premium Bonds

The premium bonds in UK is different from the US government bonds. When you buy a United Stated government bond, you will receive your principal investment and interest after 10 or 20 years later. In other words, you will only see the money after the period of 10 or 20 years has lapsed. On the contrast, the UK premium bonds allow you to redeem them at any time. The value that is returned to you will be equivalent to the amount you buy at that time.

A public fund is set up for the collection of the accrual of interest. Every month, participants will stand to win cash prizes using the interest earned from the fund. These prizes are given away in the lottery manner. Therefore, if you buy more bonds, your chances of winning the cash prize increase. Don't underestimated the value of the prize. The first prize can be easily over a million dollars.

Don't be despair if you are not the winner of the first prize. You also have your opportunity with smaller prizes. The values of these winnings are far higher than the small interest you can get from American bonds. That is why many people are attracted to premium bonds because they are filled with elements of surprise. In addition, you don't have to wait many years to see the yield or lose money.

Just imagine that you don't have to buy lottery tickets every week but you are automatically signed up in the draw. Your bond represents one lottery. You have two options. You can cash in and participate in the lottery should you need the money. Otherwise, you can just not get involved.

In the American government bond, you will not receive any monetary benefit or premiums if you withdraw the money before the stipulated period. With premium bonds, you have more flexibility with the funds. Apart from the savings, you can participate in the lottery for your whole life.

During the draw, the machine will produce the winning numbers. You can go to Internet and check if your number matches the winning number. You also check with the British newspaper to see if you have won the prize numbers. They will also contact you within 4 days after the announcement of the results.

Sometimes, the organizers offer two prizes with big amount of money in a month. The smallest prize money is 50 pounds. This amount is three times of the interest you earn in the US bond market.

If you buy more premium bonds, you increase the likelihood of winning the prized money. Should you have US treasury bonds or a bank saving account which only gives less than 3% of monthly interest rate, then it is about time to invest your hard earned money in UK or Canada premium bonds.