This premium bond has been introduced by Harold Macmillan in April 1956 and this bond is specifically launched with an objective of encouraging people to save money after the war on November 1956 and also to control the rising inflation.
What are Premium bonds
Premium bond is a general term for all the bonds in the market that sells more than 100% of the par value.
Premium bonds are issued by the government of United Kingdom, it is popularly known as Lottery Bonds. If you invest in premium bonds government gives assurance that it will take back the bonds.
How Premium bonds work?
Government gives 100% assurance on buying the investors’ bonds back, Interesting thing in premium bonds are the government will pay the interest to the individuals who have invested in the bonds through a different way, instead of paying it directly to the investors , government creates a fund called a prize fund, it pours all the interest money into the prize fund and there will be a monthly draw to decide who is going to get the prize fund, one winner each month will get all the interest money, remember this type of prize money is not a taxable income. This is controlled by NS&I. The money you got as a prize can be re-saved, which will increase the chance of getting higher prize money.
Positives of Premium Bonds
The money you have invested in premium bonds is safe because the money is backed up by the government. You can re invest your prize money or claims back your prize money.More you invest, more you gain.
Premium bonds have become very popular in UK, just because of this lottery effect, which makes people to invest and also the money which you have invested is safe, so no worries just invest your money and see the magic. Buying Premium bonds are easy , you can apply premium bonds online.