UK Savings - Premium Bonds
This form of national savings has full security of capital. However, instead of adding interest in the normal way, a notional rate of interest applies which creates a monthly prize fund. Prizes are then awarded by random selection. No tax is deducted.
The notional interest rate was reduced from 1.4% p.a. to 1.0% p.a. from 1st December 2020. In my view, premium bonds remain very competitive in today’s savings market in the UK. Switching existing savings into premium bonds is well worth considering.
Some bondholders currently receive their prizes by cheques (called warrants) being sent by post. This option is in the process of being withdrawn, but computer problems are delaying the change. Continuing options are paying the prizes directly into a bank or building society account and using them to purchase more bonds, subject to not exceeding the maximum £50,000 holding.
(23/12/2020)
