Premium bonds were introduced by Harold Macmillan in the year 1965. Premium bonds are government bonds and the prices of these bonds are more than their par value. According to the National Savings and Investments, these bonds are held by near about 23 million people. These bonds are considered to be the easiest and the safest means of saving money. These bonds ensure the bondholders that their investments are totally secured. However, premium bonds are generally of two types, callable bonds and non callable bonds.
A person making an investment in Premium bonds basically makes investments in the government. The government does not pay the bondholders interest; instead they pay the money into a fund known as the prize fund and also provide the bondholder an opportunity to win tax-free prizes. A person investing in these bonds should remember that these bonds cannot be held jointly by two people. Besides, these bonds cannot be transferred from one person to another. However, the main advantage of this kind of bond is that a person can cash it whenever he wants.
A person can purchase the Premium bonds either over the phone or by getting an application directly from the local post office. However, a person who wishes to buy Premium bonds can even download the application form from the Internet. The Premium bonds are generally sold in multiples of £10. A person investing in this kind of bond has to make a minimum investment of £100. However, the investment in case of these bonds can go as high as £30,000. Anyone who is 16 years or more are eligible for making investment in these bonds. However, in case of children and people below 16 years, Premium bonds are generally purchased by their guardians or parents.