Bonus bonds &
premium bonds

Premium Bonds
Premium Bonds are issued by National Savings and Investments (NS&I) although they may be more familiar to you as they are not exclusively for children. You can however buy them on behalf of children under 16 years old and there is a minimum purchase of £100. The most you can have is £30,000. These do not pay you interest so in real terms the money will lose value against inflation. However, each month the bonds are entered into a prize draw calculated to be the equivalent amount to all the interest the bonds could have earned. Prizes range from £1,000,000 to £50 and in any given month over a million prizes could be won and all these prizes are also tax free. The chances of winning are fixed by the treasury and currently stand at 22,000 to 1.

Bonus Bonds
Children’s Bonus Bonds are also provided by National Savings and Investments (NS&I). NS&I is backed by the HM Treasury so they have the benefit of being 100% secure. The Bonus Bonds they offer are long-term tax free investments for children. They are available to anyone under 16 years old and can be purchased with a minimum of £25. The maximum you can invest is £3,000 per child. The investment term is 5 years and you will receive a fixed rate of interest plus a guaranteed bonus. After five years you, or your child if they are over 16, can decide to cash it in or sign up for another 5 years. The bonds can be held until the child reaches 21 years old and as well as being exempt from income tax they are also exempt from capital gains tax.