My Dad has just won £500 on the Premium Bonds! To many (younger) people that sentence will mean very little, and other (old) prople will say they didn’t know there still was such a thing.
When I was young, way before the days of the National Lottery and the ubiquitous scratch cards on sale at every corner shop, the only way of winning money, short of going into a betting shop, was the football pools and the Government-backed Premium Bonds tax-free savings vehicle in which instead of interest, you get put into draw and could win a prize between £25 to a £1 million.
Much has been written about Premium Bonds not being a good investment. Negative opinions range from Martin Lewis Money Saving Expert saying:
…they’re only a good bet as a serious place to put savings if you’re lucky, or you’re a higher- or top-rate taxpayer who has used up their personal savings allowance, cash ISA allocation, and top bank savings accounts.
…factor in our generous view in assuming premium bonds earn their owners 1.35pc, and you’ll see why I’m declaring them dud investments.
In fact, Dyson goes on to say:
…much is said about the warm feeling you get dreaming about a life-changing jackpot win of £1m. Obviously there will be no winning at all if you don’t own any bonds. But I can assure you there won’t be much winning even if you do.
In these days of the variety of tax-free savings accounts available, the low Premium Bond interest rate of 1.4% and low chance of winning (1 in 35,926,766,878 of winning the £1 million jackpot) they’re not as exciting a product as they were when I was a kid, and ERNIE(the anthropomorphised Electronic Random Number Indicator Equipment) drawing your Premium Bond number was a path to escaping the poverty of growing up in a poor mining town.
However, my Dad LOVES Premium Bonds! And here’s why. If you have £24,500 of Premium Bonds (half the limit), you will almost certainly get a £25 winning cheque every month. That’s once a month you get a letter telling you that you are a lucky person, you’re a winner! And it leads to a trip to the bank on cloud nine. And a smiling bank teller saying “well done Mr Arnott, another win on the Premium Bonds, you should choose my Lottery numbers!”. And a skip in your step on the way home. And maybe buying yourself a wee cream cake as a treat. And going to bed that night thinking “what a great day that was”. How lovely is all of that? For a old widower, pretty-much housebound, and not seeing another human being for days at a time, I can tell you that it’s a pretty big deal. So what if he’s losing a few quid he could have made in a higher-interest ISA, this is something that makes him air-punchingly HAPPY every month, which money can’t buy.
So, recently my Dad won £500 (the chances of that are 1 in 10,457,501) and he was cock-a-hoop, and phoning people up, you’d think he’d won the jackpot! How often does getting a bank statement make people THAT happy?
My thinking here is that the National Savings and Investments agency are missing a trick. Instead of a dull cheque in a plain envelope, it should be something much more celebratory. Individualised, high-quality, personal printing is so common and inexpensive nowadays, so why not:
- Make the cheque look more like a beautifully designed gift certificate.
- Enclose the cheque in a personalised greetings card.
- Make the cards gold and silver embossed for the higher-value wins
- Have new card designs every few months, like commemorative stamps, so the cards become something to put on the mantlepiece (and become collectors items).
There definitely seems to be a missed opportunity here for the National Savings and Investments agency. Maybe they can’t match the interest rates of the big banks, but with Premium Bonds their appeal could be that they bring real joy in saving in a way that dull banks can’t, and the thrill of winning without the downsides of gambling.
So, if your parent or grandparents have some savings gaining not much interest in a bank account, maybe Premium Bonds are worth revisiting to bring a winning smile to their face.
ps I am not a financial advisor, and this blog post should not be construed as financial advice!