The Cash Trio

Premium Bonds provide investors with a chance at winning tax free prizes, rather than simply earning interest rate payments. They are available in the United Kingdom through National Savings & Investments (NS&I).Premium Bonds have proven very popular attracting 23 million investors in the UK with holdings of £26 billion. The money invested is secured by HM Treasury, so no one loses the original capital placed in the bond.Introduced in 1956 to improve savings rates and curb inflation, Premium Bonds provide the public with both entertainment and an investment instrument. Bonds are available starting at £100, or if you buy on a regular monthly basis at £50, for which you receive 100 bond numbers. Each number provides the investor with a chance of winning when numbers are selected every month by ERNIE (electronic random number indicator equipment). An individual can hold up to £30,000 of Premium Bond numbers, and the more numbers, the more chances one has of winning. ERNIE generates random numbers by monitoring thermal noise in transistors and is thus considered a physical random number generator rather than a more predictable pseudo-random number generator. ERNIE’s random numbers are tested monthly by an independent body that must certify that the output is statistically random.There are currently more than one million types of cash prizes with the top jackpot offering of £1 million. All prizes are free from income tax and capital gains tax and are not declared in tax return documents.Studies have shown that one in every three eligible persons in the UK invests in Premium Bonds. One must be at least 16 to buy a Premium Bond, but a parent, grandparent, great grandparent or guardian can invest on behalf of their children. The bonds cannot be purchased jointly like American lottery tickets and are not transferable.