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.