Premium Bonds are currently the UK’s most popular savings product, with over 22 million people saving a staggering £68 billion in them.
So how do premium bonds work and if you’re an investor already, when is the best time to sell them?
What are Premium Bonds?
NS&I Premium Bonds are a cross between a savings product and a lottery that decides the interest rate.
You can use your Premium Bonds as a savings account, putting money in and withdrawing it whenever you want to.
The interest is paid based on a monthly prize draw. Every £1 Premium Bond has an equal chance of winning, therefore the more you purchase, the greater your chances are of winning.
Premium Bonds Do Not Offer the Best Rate
The minimum purchase amount for Premium Bonds is £100, or £50 by monthly standing order and you must be over 16 years of age to buy them.
Kids under 16 can still be part of the draw if their parents or grandparents buy the Premium Bonds on their behalf.
The NS&I call its IT equipment ‘ERNIE’, (Electronic Random Number Indicator Equipment) to give it a sort of quaint charm.
However, ERNIE is just a basic random number generator that is audited to ensure fair play.
The interest paid on Premium Bond prizes is tax-free.
When should you buy and sell your Premium Bonds?
The best time to buy and sell Premium Bonds is towards the end of the month.
This is because you must hold the Bonds for a minimum of one calendar month before you can be entered into the draw.
The Premium Bonds draw takes place on or around the first of each month. If you buy your Premium Bonds around the 27th of the month, this allows a couple of days for the transaction to go through.
You will then have to wait a calendar month to be eligible for the next possible draw date. Adopting this strategy means that you have the minimum waiting time before you are in the draw.
When selling your Premium Bonds, the same principle applies. Wait until after the draw is finalised to withdraw your money and any interest you’ve won, and then sell your Premium Bonds so that you don’t miss out on a possible win.