Could your child’s Christmas cash make them a millionaire?

Could your child’s Christmas cash make them a millionaire?

December 25, 2018

Could your child’s Christmas cash make them a millionaire as Premium bonds slashes minimum investment from £100 to £25

  • Early next year the Government will offer £25 premium bonds to the market 
  • The bonds pay out monthly tax-free prizes of between £25 and £1 million 
  • Next month, National Savings and Investments will pay out some £90.8 million
  • Most of these prizes will be for £25, there are more valuable prizes up to £1m 

The Government is reducing the minimum investment in Premium Bonds from the current level of £100 to £25 to encourage more saving

If your child received cash for Christmas, consider squirrelling it away, ready to buy Premium Bonds in the New Year.

Those willing to wait a few weeks will be able to invest as little as £25 in the bonds, compared to the current minimum requirement of £100.

Premium Bonds allow you to enjoy a flutter each month without losing your stake. The Government-run National Savings & Investments, which sells the bonds, pays out monthly tax-free prizes worth between £25 and £1 million.

Next month, NS&I expects to hand out 3,177,703 prizes worth £90.8 million.

The vast majority of these (3,120,433) will be for £25. There are then 24,906 £50 and £100 prizes apiece; 5,451 at £500; 1,817 at £1,000; 101 at £5,000; 51 at £10,000; 21 at £25,000; ten at £50,000; five at £100,000 — and two £1 million jackpots.

At the start of each month, winning numbers are generated by a machine known as ERNIE (Electronic Random Number Indicator Equipment), which was invented by one of the team of World War II code breakers at Bletchley Park.

In 1956, it took more than 100 days to complete a draw. Now, it happens in around five hours.

Every £1 bond number has a one in 24,500 chance of winning a monthly prize. But, for the £1 million jackpot, the odds are much longer, at around one in 39 billion.

When the first Premium Bond was sold on November 1, 1956, the minimum stake was £1 — worth around £24.97 in today’s money.

It crept up to £2 in 1972 (around £26.93) and again to £5 (£39.95) four years later, before doubling to £10 (£30.62) in July 1985.

The numbers are picked out by a the Electronic Random Number Indicator Equipment more commonly known as ERNIE

To curb costs, NS&I hiked the minimum stake to £100 (£255.36) for adults in the late Eighties and then for children in 1993.

This effectively priced out grandparents who wanted to treat all their grandchildren to the same stake at Christmas as well as many parents. However, next year, the minimum investment will be reduced to just £25.

NS&I will not say exactly when this will happen, only that it will be before the end of March.

The Government savings arm also plans to allow uncles, aunts, godparents and family friends to buy Premium Bonds for children.

Currently, only parents, grandparents and legal guardians can purchase the bonds for under-16s.

Ian Ackerley, chief executive of National Savings & Investments, says: ‘We are extending the opportunity for more people to save and trying to encourage a savings habit, especially among younger people.’

Despite the current minimum stake of £100, Premium Bonds have remained the favourite NS&I product by far, with some £78 billion invested by more than 21 million customers.

That’s nearly double the size of Britain’s second-largest building society, Coventry.

Over a 12-month period, NS&I currently pays out 1.4 pc of the value of the money in the bonds — or just over £1 billion — though this percentage and the odds of winning can change. If you buy Premium Bonds online, over the phone or through the post for your grandchildren, you need to name a parent or legal guardian to look after them.

The child will then receive the prize money — even if you bought them.

The bonds must be held for a full calendar month before they go into the draw. So bonds bought in January will go in from March.

All money in the bonds is 100 pc guaranteed by HM Treasury. 

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