Buying Premium Bonds for someone as a gift is a great idea. Premium Bonds are a popular investment in the UK that offer the chance to win tax-free prizes while maintaining the original investment. Purchasing Premium Bonds for a friend or family member allows you to give them the excitement and potential rewards of Premium Bonds while also providing a thoughtful financial gift.
What are Premium Bonds?
Premium Bonds are government-backed savings bonds issued by National Savings and Investments (NS&I) in the UK. With Premium Bonds, instead of earning interest, each £1 bond is entered into a monthly prize draw with the chance to win tax-free prizes ranging from £25 to £1 million.
The minimum Premium Bonds purchase is £25. The maximum holding limit is £50,000. Premium Bonds are generally considered a safe investment since the original amount invested is secured by HM Treasury. The bonds can be easily cashed in by the owner if needed.
Benefits of gifting Premium Bonds
There are several advantages to gifting Premium Bonds:
- Chance to win prizes – Premium Bonds add excitement through the opportunity to win tax-free cash prizes each month. This makes them appealing as a gift.
- Maintains initial investment – The bond value remains the same, unlike other investments which can fluctuate. The recipient gets to keep their original investment amount.
- Easy to cash in – Recipients can access their money simply by selling back bonds to NS&I with no fees.
- Tax-free prizes – Winnings from Premium Bonds are completely tax-free, adding to their appeal.
- Gift options – Premium Bonds can be purchased as a gift for birthdays, weddings, holidays, graduations, or just as a nice surprise.
Overall, Premium Bonds represent a unique gift that provides lasting value and excitement through the potential to win prizes.
How to buy Premium Bonds as a gift
Purchasing Premium Bonds as a gift is straightforward. You can buy them for someone else online, by phone, by post, or in person at a Post Office.
To buy Premium Bonds as a gift online or by phone, you’ll need:
- The recipient’s NS&I number if they already have Premium Bonds
- The recipient’s personal details including their name, address and date of birth if they don’t have Premium Bonds yet
- Your bank account details to make the purchase
Steps to purchase gift Premium Bonds:
- Purchase – Buy Premium Bonds online or by phone in the recipient’s name. You can contribute as little as £25.
- Record gift info – Keep a record of the Premium Bond reference number, purchase amount, and recipient’s information.
- Deliver gift info – Give the Premium Bond reference number, purchase amount, and activation info to the recipient.
- Activate bonds – The recipient must activate the bonds by phone, post, or online to start entering prize draws.
If buying Premium Bonds as a gift by post or in person, you’ll need to provide the application and payment along with the recipient’s personal details. Include a note that the bonds are intended as a gift.
How much do Premium Bonds cost?
Premium Bonds can be purchased in any amount from £25 up to £50,000. Some key purchase options include:
| Purchase Amount | Cost |
|---|---|
| £25 | £25 |
| £50 | £50 |
| £100 | £100 |
| £500 | £500 |
| £1,000 | £1,000 |
| £5,000 | £5,000 |
| £10,000 | £10,000 |
| £50,000 (max) | £50,000 |
Each £1 Premium Bond is entered into the prize draws. So the more bonds purchased, the more chances to win prizes each month.
Are there gift options for Premium Bonds?
There are a few ways to tailor a Premium Bond gift purchase:
- Digital gifts – An email gift voucher can be purchased starting at £20 and going up to £400. This allows the recipient to redeem the voucher for Premium Bonds themselves later on.
- Children’s Premium Bonds – These can be bought for kids under 16. Parents, grandparents or legal guardians make the purchase and manage the bonds on the child’s behalf.
- Joint bonds – Two recipients can be added to a single Premium Bonds holding as joint owners. Either person can manage the bonds.
- Future date gifts – Purchases can be scheduled for a specific future date such as a birthday or anniversary. The bonds are bought on that date.
These options allow customization to make Premium Bonds an even more thoughtful financial gift.
What are the prize odds and rates for Premium Bonds?
While winning a prize is not guaranteed, the prize structure and odds for Premium Bonds are:
| Prize | Odds Per £1 Bond | Average Prize Frequency |
|---|---|---|
| £1,000,000 | 1 in 3,500,000 | Once every 4 years |
| £100,000 | 1 in 3,500,000 | Once every 4 years |
| £50,000 | 1 in 3,500,000 | Once every 4 years |
| £25,000 | 1 in 3,500,000 | Once every 4 years |
| £10,000 | 1 in 2,160,000 | Once every 7 years |
| £5,000 | 1 in 432,000 | Once every 35 years |
| £1,000 | 1 in 24,000 | Once every 5 years |
| £500 | 1 in 12,000 | Once every 10 years |
| £100 | 1 in 4,800 | Once every 40 years |
| £50 | 1 in 2,400 | Once every 80 years |
| £25 | 1 in 1,200 | Once every 160 years |
On average, currently around 1 in 24,500 Premium Bonds wins a prize each month. With more bonds owned, the chance of winning goes up.
Prize draw interest rate
While not guaranteed, the effective prize fund interest rate on Premium Bonds is currently:
- 1.40% tax-free for standard Premium Bonds
- 2.20% tax-free for children’s Premium Bonds
This rate can fluctuate and prizes are not guaranteed each month. However, over time Premium Bonds provide a modest tax-free return.
Do Premium Bonds make a good gift?
Premium Bonds can make an excellent, unique gift in many situations such as:
- Birthdays – An exciting financial gift for milestone birthdays or as a nice surprise.
- Graduations – A practical gift to start a graduate’s financial future.
- Weddings – Can be purchased jointly for a newly married couple.
- Holidays – A fun extra gift for the holidays, new year, or as a stocking stuffer.
- Children – Buying Premium Bonds for kids provides future savings.
- Retirement – An engaging gift to start retirement with chances to win.
As a financial gift that keeps giving, Premium Bonds are sure to bring excitement and lasting value.
Can I deliver Premium Bonds in person?
Yes, you can deliver Premium Bonds to the recipient in person once purchased. To do this:
- Buy the Premium Bonds as a gift online, by phone, post or in person.
- Wait for the confirmation letter from NS&I to arrive by post to your address.
- Hand deliver this letter to the gift recipient. This contains their Premium Bond holder’s number and other activation details.
- Consider including the amount you purchased and purchase date to disclose the full details to the recipient.
As long as you have the confirmation details from NS&I, you can personally deliver the great news about their new Premium Bonds!
Can I check if someone has won a prize?
You can check if Premium Bonds you gifted to someone have won a prize by:
- Calling NS&I – Call the Premium Bonds prize checker phone line. You’ll need the holder’s NS&I number and personal details.
- Checking online – Log in to the NS&I website. You’ll need the recipient’s account details and security info to check online.
- Asking the recipient – The easiest way is asking the recipient to check their own account and let you know of any prizes.
As the purchaser, you won’t receive prize notifications directly. Checking requires either logging into the recipient’s account or contacting them to share any prize news.
Can Premium Bonds be gifted anonymously?
Premium Bonds cannot be gifted anonymously. NS&I requires the recipient’s full personal details including their name, address and date of birth to set up an account in their name.
Even if you wish to remain anonymous as the purchaser, all bond accounts must be registered to a verifiable individual. This is required for regulatory and audit purposes to track the ownership of bonds entered in prize draws.
While you can choose to remain anonymous to the recipient, their details are still needed upfront when buying the bonds as a gift.
Are there tax implications for gifted bonds?
There are no tax implications for Premium Bonds that are gifted. Some key tax considerations include:
- Prizes are tax-free – Winnings from gifted bonds do not need to be declared or paid out in tax.
- No inheritance tax – Premium Bonds gifted by will or as an inheritance are exempt from inheritance tax.
- No capital gains – Cashing in gifted Premium Bonds does not incur capital gains tax.
- No stamp duty – Transfers of Premium Bonds between people do not incur stamp duty costs.
Premium Bonds enjoy tax-free status on prizes, inheritance, withdrawals, and transfers. This tax exemption remains the same even when bonds are gifted.
Are there risks to gifting Premium Bonds?
There are minimal risks associated with gifting Premium Bonds. However, some considerations include:
- Prizes not guaranteed – The recipient may not actually win any prizes, although regular draws maximize the chances over time.
- Requires responsible management – The recipient will need to manage and track their bonds responsibly once gifted.
- Locks up money – The amount gifted in bonds is locked up until the recipient chooses to cash them in.
- Annual limit – Gifted bonds still count towards the £50,000 annual limit, restricting further purchases.
While low risk overall, it’s worth noting bonds may not immediately benefit the recipient and require their ongoing management. Communicating expectations upfront when gifting helps mitigate any downside.
Conclusion
Gifting Premium Bonds can make a great birthday, holiday, graduation, wedding, or general financial gift. The ability to buy bonds for someone else lets you provide them an exciting, rewarding investment through the chance to win tax-free cash prizes over time.
Purchasing Premium Bonds as a gift is easy and convenient online, by phone, by post, or in person. Gift options like digital vouchers and future date purchases allow further customization of the gift.
With sound odds of winning over the long run and tax-free prizes, Premium Bonds gifted to a friend or family member can give lasting financial joy and value for years to come.
