Premium Bonds for Children

Video looks at the benefits and how to set up Premium Bonds via a nominee for children.

Transcript:

“Hello there, continuing my theme for children's savings and savings for your children and grandchildren: subject in this video is national savings and specifically national savings and premium bonds. Ernie! The million pound payout.

So first things first, every single person in the United Kingdom who is resident is eligible to invest between £100 as a minimum and up to £40,000 in premium bonds and that includes your children …..great!

Okay, so premium bonds do not pay interest. It is a prize draw and their stated odds, I think, are something like, a winner every month I think the odds are 26,000 to 1. So pretty much to win usually every month I would suggest you need to have the maximum holding of £40,000.

Now, the stated payout the prize pot for premium bonds, is currently and I’m shooting this video in January 2015, 1.35%. So that's hardly sudden setting the world alight for us in terms of returns where you could be looking at child trust funds, if they got them, or if they've been born recently [a] junior ISA and some things like that or even just all savings accounts and investment accounts.

[But] fundamentally national savings, effectively backed by a current government guarantee, your children have their own allowance for premium bonds. Now the way that works is you can invest for children but it is held in either the parent or the guardian's name and then nominated for the child. So effectively it will say it's owned by Mr Bloggs or Mrs Bloggs on behalf of said child Junior Bloggs let’s say. But in fundamental terms you can invest between £100 and £40,000, the payout prize draw 1.35% tax-free so it like I say, it’s not interest, it is it is a prize draw and that's what they payout every month 1.35%.

[And] in terms of winnings, prize winnings, can be anything between £25 as a winner or up to the ‘Ernie’ payout of £1 million. So that gives you a basic salary of premium bonds for children you can apply online for premium bonds at National Savings and Investments and you know it has to be a consideration: What if the million did come up?

So the payout, comparatively, is quite low but it's tax-free, income tax-free, capital gains tax free and you know it does offer an element of security and I would suggest that as part of any portfolio that you may be building up for your children or grandchildren you consider premium bonds for children. Thanks very much for watching.”