The public are expected to deposit millions of pounds into premium bonds in the coming weeks as the new limit becomes £50,000, up from £40,000. The National Savings & Investment bonds, that are backed by the government, have had their investment limits relaxed by £10,000.
The low interest rates offered by banks and building societies alike have led to customers becoming disenfranchised and instead are choosing to invest in premium bonds. The bonds also offer the chance to win prizes of anywhere between £25 and £1 million - all of which is tax-free.
A huge £6 billion has already been put into these bonds since June last year. Around that time the investment limit was raised £10,000 from its previous £30,000 limit. That increase marked the first time the limit had risen for 10 years.
At the present moment in time, the public have roughly £53 billion put away in bonds. This represents investments from around 23 million savers. These savings are higher than the total level of savings with Yorkshire Building Society who are the second biggest company of its kind in the UK.
There are currently around 250,000 people who have invested the maximum limit of £40,000.
The NS&I's bonds work on the basis of paying out prices to those who have invested money and kept it invested for over a month. These bonds are much more likely to pay out that things such as the National Lottery. The lottery has odds of one in 14 million, these bonds have odds of one in 26,000.
Unlike savings accounts that are held with banks or building societies, these bonds do not pay out interest. The only way that will receive a return on your investment is when you win a prize in the draw. The total interest rate that these prizes equate to is 1.35% every year - this is taken based on the total amount of money invested.
This "interest rate" can change at any time, with the last peak being 3.4% back before the financial crisis. This 1.35% rate would pay out £675 from the new limit of £50,000 if it were to be saved in a traditional bank.
In the last month the £60 million has been paid out in just 2.07 million prizes, over 2 million of these prizes were £15. The 168 payouts ranged between £1 million and £5,000; over 1,000 people won £1,000, over 3,500 were paid £500.
If you decide that you would like to remove your saving at any point, then you can sell your stake for its original value and you will receive your money back within 8 working days.
If you are over the age of 16, then you are eligible to buy premium bonds. The smallest amount that you can invest is £100. The invested money is protected by the treasury so you won't be at risk of losing it. All winnings are tax-free.
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