Are Premium Bonds a good gift for hard to buy young family members?

Tea and crumpets. Cricket. Constantly talking about the weather. Premium Bonds. All of these are unequivocally British and the last has captured the imagination like no other financial product since launching in the 1950s.

When I interviewed Agent Million some seven years ago – the person whose job it is to deliver £1million jackpot news to people across the land each month – a thread went viral on website Reddit.

Essentially, a largely American audience couldn’t believe such a product existed: a lottery in which you can play and get your stake back. Bonkers.

Good piggy: Premium Bonds are a better gift for youngsters than throwaway toys - especially if you club together Howzat! Premium Bonds are as British as cricket and with nearly 100 x £10,000+ prizes up for grabs, can give as much excitement as The Ashes Howzat! Premium Bonds are as British as cricket and with nearly 100 x £10,000+ prizes up for grabs, can give as much excitement as The Ashes

Howzat! Premium Bonds are as British as cricket and with nearly 100 x £10,000+ prizes up for grabs, can give as much excitement as The Ashes

Taking a look at the list of £10,000+ winners for August 2019 – of which there were 96 – nearly half, or 45, were won by those holding the maximum amount: £50,000.

One lucky person in Greater Manchester won £10,000 from a £100 holding. There are six other examples out of that 96 – £10,000+ winners for August who won a five-figure sum holding four figures or less:

One winner won £50,000 from £8,000, one £25,000 holding £7,689 – while £10,000 was won by people holding £7,200, £3,000, £2,500 and £1,700. It does happen.

What this indicates to me is you need to have a fairly sizeable chunk invested in Premium Bonds – anything below a four-figure sum is unlikely to bare significant fruit unless you are incredibly lucky. 

Premium Bonds Winners

Prize
Area
Value of bond

£1,000,000
Surrey
£9,636

£1,000,000
Hertfordshire
£6,000

£100,000
Hampshire and Isle of Wight
£13,000

£100,000
Hereford and Worcester
£5,000

£100,000
Greater Manchester
£29,975

£100,000
West Midlands
£2,950

£100,000
Wales
£30,000

£100,000
Cambridgeshire
£5,000

More September 2019 winners
View list of September 2019 winners

One option is clubbing together with other family members – start buying them every birthday and Christmas. My niece would soon build up a tidy nest egg, rather than a messy toy stack, with this route. 

All that is needed is the child’s Premium Bond holder’s number which will be created when the first Bonds are bought. 

Let’s say me, my brother, mum, and dad all clubbed together to buy £50 of Premium Bonds at the same two junctures each year. 

That would result in £6,400 in Bonds by the time she is 16, improving her odds of winning each year. 

The money is about as ‘safe’ as it can be – casting inflation aside – but returns could be superior elsewhere. 

For example, if you’re able to bag returns of five per cent a year investing an equivalent amount, that £6,400 would grow to nearly £10,000 in 16 years.

That is of course a big if, but achievable. 

Even a Junior Isa – of which NS&I offers a superior 3.25 per cent compared to the Premium Bond underlying rate of 1.4 per cent – would grow that pot to nearly £8,500, which currently beats inflation.

With ‘typical’ luck, that £6,400 would turn into little more than £7,000 with Premium Bonds.

That said, neither offer that excitement factor of potentially winning a life-changing sum of money with so little. 

I won’t be surprised to see the NS&I coffers swell with this move – they could be the ultimate present from unimaginative aunts and uncles for awkward-to-buy-for little ones. 

NS&I research revealed that two in five of people who gifted cash to a child aged under 16 has, within the last year, given to a relative that wasn’t their own child or grandchild. A third gifted between £25 and £50.

It is also a good way of explaining – and showing – children the savings habit as they grow-up, something that I’m keen to do for my own young daughter and extended family.  

The products are already a popular savings product for the under 16s – more than 750,000 have them and on average, hold around £1,500, NS&I says. 

With average luck, over five years, you’d expect a return of £100 on this.

Since the £1million jackpot was launched 25 years ago, ten under 16s have scooped the top prize and this August, 50,000 prizes were won by the under 16s, the largest of which was £5,000.

Nearly £400million worth of Premium Bonds have been bought for children under 16 since August 2018 and of those, over 64,000 have won prizes including one of £10,000 and 36 prizes worth £1,000.

That’s plenty of tea and crumpets, tickets to watch the cricket – or enough to get away and talk about the weather some place more exotic.

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