Yet they have a relatively low-interest rate and many other saving options are now also tax-free.  So the question is – are Premium Bonds worth it?

What are Premium Bonds?

NSANDI Premium Bonds are a type of savings account that you can add money and take it out any time you want.  Interest is paid and there’s a monthly prize draw.  Bonds can be bought in £1s and everyone has the same chance of winning so the more you buy, the greater your chance is of seeing a prize.

There is a minimum of £25 for a one-off purchase and monthly standing orders and you can’t have more than £50,000.  You have to be aged 16 to buy them or they need to be held in the name of a parent or guardian until you are.

The monthly prizes are one of the big draws to Premium Bonds.  There are two monthly winners of £1 million, 5 of £100,000 and 11 of £50,000 as well as smaller prizes going down to £25.  You have a one in 24,500 chance of winning £25 so don’t get too excited about the idea of winning loads!

Tax-free savings

One of the big benefits of Premium Bonds used to be the fact that the interest paid on them is tax-free.  However, this shine has been taken off somewhat since the launch in 2016 of the personal savings allowance (PSA) which allows you to have all savings tax free up to £1000 interest a year for basic taxpayers and £500 a year for higher rate taxpayers.

This means that 95% of people can now have savings that have tax free interest so this advantage to Premium Bonds is no longer relevant.

The prize rate isn’t great

There’s definitely something attractive about the potential for winning a million pounds for your savings but in reality, the prize rate isn’t great.  If you ring NSANDI (and you can find the NSANDI phone numbers are listed here) they will tell you that the prize rate is 1.4%.

In reality, for every 25 people with £100 in bonds, 24 of them will not win a prize.  For people with £1000 in bonds, 3 out of 5 will not win a prize while if you have £15,000 in bonds, 1 in 1552 will not win a prize.

All savings are protected

NSANDI might sound like a bank or building society but they are actually a government department – the government owns the Premium Bond system.  Now that does mean they are 100% safe and there’s no chance the company goes broke and the owner runs off with the money.  However, it is worth mentioning that all savings are protected anyway under the savings safety rules so as long as you use a UK-regulated savings product, you are protected up to £85,000 per person – and the maximum for Premium Bonds is £50,000 anyway.

Prize rate versus savings rate

If you consider that prize rate of 1.4%, this is the figure to compare against other savings products to see what is the best option.  And while it compares well with some, there are definitely other savings products out there that provide a higher rate of interest on your savings.  Some general examples include:

• Top easy access normal savings accounts – 1.5%
• Top easy access cash ISA – 1.45%
• Top two year fixed savings – 2.31%
• Top two year fixed cash ISA – 1.9%
• Some current accounts – 3% on balances up to £3000

So if you have money that you don’t need to access for a couple of years, you can definitely get a higher rate of interest.  Premium Bonds compare with standard savings products so there it is more a personal choice matter.

You can resave your winnings

If you don’t already have £50,000 in Premium Bonds and you do win some money, you can also choose to resave this.  In other words, you can turn the winnings into more Premium Bonds and increase your odds a bit that you win more and bigger prizes.  This is a bit like leaving the interest from your savings in the account to continue to grow your pot.

Are they worth it?

There’s nothing wrong with Premium Bonds as a way of saving.  While the chance of winning a substantial prize is higher than the chance of winning big on the National Lottery, there is always a chance.  And smaller prizes can accumulate to build your pot and increase your odds.  So really, if you like the idea of potentially winning more money, then Premium Bonds can be a good option – just be aware of the odds and don’t expect that millionaire pay-out any time soon!

New research from MoneySuperMarket reveals that a third of Brits (33%) currently use a smart device to monitor their health, capturing data that could help identify health issues and affect the way life insurance premiums are calculated.

With the number of connected wearable devices set to rise further in 2019,  MoneySuperMarket research reveals that millennials are most likely to use werable tech to monitor their health, with just under a third of 18-35 year olds using their mobile phones alone. As the trend for fitness tech continues, some insurance providers such as Vitality are already utilising the data gathered – a move which would be favoured by millennials, with three in four (61%) stating they would be comfortable with sharing their data with a life insurance provider.

The research also shows that half (50%) of those surveyed have both a life insurance policy and a health monitoring device. In fact, when looking at the way future life insurance premiums are calculated, over one in 10 Brits (12%) would happily take out a life insurance policy based on the data received solely from a wearable health monitor. For example, Apple watches now include ECG montiors[1]. Those in the West Midlands (15%) and London (12%) are most likely to opt in for this type of policy, with those in the South West being the least likely (five%). However, despite advances in technology, the majority of Brits (65%) would still prefer to take out a life insurance policy via the traditional methods of questionnaires and forms.

An individual’s lifestyle can also play a big part in how much they pay for life insurance. Smokers, for instance, can pay up to 50% more than a non-smoker for their policy[2]. Wearable tech could reduce premiums for those who demonstrate a healthier lifestyle and also provide rewards and incentives for healthy behaviour, such as reaching a specific step count.

Consumer affairs expert at MoneySuperMarket, commented: “Wearables are beginning to have a significant impact on the life insurance market. They build on the well-established premise that a person’s lifestyle and habits play a big role in determining how much they will pay for cover. The logic is simple: use a device to demonstrate your healthy lifestyle and get lower premiums in return.

“Anything that increases the uptake of life insurance has to be a good thing - it’s vital financial protection for family members in the event of a person’s early death. Understandably, many of us shy away from something that confirms our own mortality, but it is crucially important to have cover in place so that bereaved dependants at least have financial resources to call upon.”

(Source: Money Supermarket)

Two of the UK’s largest insurance companies, Axa and Aviva, recently disclosed increased profits and dividends at a time when drivers are paying out car insurance premiums at a record high average of £690 for comprehensive cover.

Aviva’s half year results for 2017 show that its overall operating profit rose by 11%, and that operating profit from UK motor insurance increased 9% (2017: £580m; 2016: £530m). The dividend paid out to shareholders went up by 13%.

Axa also reported strong half year performance: a 4% increase in underlying earnings, with 6% growth in revenue from UK motor insurance. Axa even concedes in their report to the stock market that the UK motor insurance market was a factor in their overall growth in the first half of the financial year.

“Axa and Aviva haven't missed a trick in blaming everything and everyone else for insurance premium rises – whiplash, fraud, insurance premium tax, the discount rate – but today we can see the real reason in black and white. Yet another boost in profits and yet more pay outs for their shareholders. They run a good line in shifting the blame but the facts speak for themselves - their whinging is to distract from what is really going on here, healthy profits and well feathered nests,” said Tom Jones, head of policy at campaign law firm Thompsons Solicitors.

In the last week, insurers have again come under fire as an investigation found motorists were being charged as much as 100% over the odds for repair costs. The Telegraph published evidence of Axa ‘instructing a repairer to charge "not at fault" customers a labour rate 54% higher than the rate paid by other customers’.

There are concerns that a potential government U-turn on the discount rate which affects the damages paid out by insurers to those with long term, serious and life changing injuries as well as the government's willingness to increase the small claims limit against inflationary logic will only see further increases in profits and remuneration for insurer CEOs.

“The insurers are constantly crying wolf and the government needs to stop pandering to them. They claim their backs are against the wall but in reality, as Aviva and Axa’s figures prove, it's all looking pretty sunny for them and their investors,” continued Mr. Jones.

“Motor insurance is compulsory in the UK yet those who provide it and are making good profit from it are unabashed in punishing the consumer by continually bumping up premiums at the same time as lobbying for changes that will restrict access to justice.”

(Source: Thompsons Solicitors)