Who wants to be a millionaire?

David Hill INLT 45-099-PSB
David Hill INLT 45-099-PSB

This week, national savings and investments have announced that they are going to double the number of monthly millionaire winners of the premium bonds.

They have also announced other changes such as the prize fund rate increasing to 1.35 per cent and seven per cent of the prize fund will now be allocated to larger prizes. So the chances of a big win have increased but even with the average return increasing to 1.35 per cent, this is still less than the rate of inflation. So the average investor will lose money, in real terms over time.

Having said that, an average return of 1.35 per cent is still better than many deposit savings accounts are currently offering without tying up capital.

The returns from premium bonds are also tax free, which will be of extra benefit to higher rate tax payers. So for cautious investors, premium bonds are a viable option as a small part of a larger portfolio.

Investors must be age 16 or over and the maximum investment amount is £40,000. The original capital invested is guaranteed by the government and capital can be returned to the investor at reasonably short notice.

Other National Savings products include children’s bonds which offer a guaranteed rate of 2.5 per cent for five years. Amounts between £25 and £3,000 can be invested per issue per child. Also currently available is their direct ISA, which offers a return of 1.5 per cent tax free with investments between £1 and £15,000.

Perhaps the best National Investment products are their Index-Linked certificates which offer a guaranteed tax-free return above inflation. Unfortunately, these certificates are currently unavailable to new investors, but should they become available in the future, most financial planners wouldn’t hesitate to include them as part of a cautious portfolio.

National Savings products can be accessed at www.nsandi.com, or through your financial planner.

David Hill is a Chartered Financial Planner and Independent Financial Adviser at Hills Financial Planning, 15 Agnew Street, Larne. He can be contacted on 028 28276814 or by email: david@hillsfinancialplanning.co.uk