economy
Premium Bonds customers urged to read up on 'most overlooked' holdings rule
Premium Bonds holders have been urged to bear in mind a key rule that applies to any customers' holdings. A financial expert warned this key figure is "one of the most overlooked aspects" of how the savings schemes works.
TL;DR
- Premium Bonds offer entries into a monthly prize draw rather than interest.
- The value of holdings can decrease in real terms if inflation outpaces returns, especially without wins.
- Inflation at 3% can reduce the real value of savings by 3% over a year if no prizes are won.
- Premium Bonds should not be viewed as entirely risk-free for growing savings due to inflation's impact.
- NS&I's website includes a caution that inflation can reduce the true value of money over time.
- Alternative options like Cash ISAs, easy-access accounts, and fixed-rate bonds may offer better returns.
- While prizes are tax-free, other options can provide higher tax-free returns, such as Cash ISAs or using Personal Savings Allowance.