Is this the time to buy Premium Bonds?

Is this the time to buy Premium Bonds?  With Rishi Sunak, the Chancellor of the Exchequer, splashing the cash in recent times, somehow or other he’s going to have some serious borrowing to make sure this runs smoothly.

Yep I was chatting to my friend Tony about this a few days ago.  We reckoned the total bill for easing the economy through the Coronavirus must be absolutely mind-blowing.  All those zeros!  Somehow the Chancellor will need to raise the money for this and we are mindful the Government will use bonds as a way of borrowing the required warehouse load of money.

According to my friend Beth, who knows about Government borrowing, she says:

• The UK abolished slavery in 1833 and borrowed money to compensate the slave traders across the British Empire.  The debt was repaid in 2015
• WW2 debts were repaid in 2006
• WW1 debt hasn’t been completely paid off as yet
• Crimean War and other debts from 1720 were finally paid off in 2015

So when will the Government be able to repay the Coronavirus debts?  Who knows?  The amount of money involved is mind boggling with 6 million workers on furlough and having 80% of their salary paid by the Government.  There’s Business Tax relief in local authorities (the blummin Councils) and a huge rise in Universal Credit applications.  Grants are being dolled out and loans made to businesses.

Then with the lack of personal spending going on, VAT receipts will have dropped like a stone.  We aren’t travelling much and therefore fuel duty isn’t flowing into the Treasury as usual.

We are indeed facing a recession.

Bonds

Bonds are secure loans to the Government and let’s face it, the Chancellor will be using these as a money raising vehicle.

Amongst the various kinds of bonds are Premium Bonds and these are often attractive and popular for many people, rather than banks or institutions.  I even remember having some given to me as a child.

So the deal with Premium Bonds is this.  You buy Bonds at £1 each.  After a clear month has elapsed, your Bond is included in the monthly prize draw where you might win anything from £25 to £1,000,000 tax free.  There are lots and lots of prizes but the odds of winning are minuscule.  If, on the other hand, you invested the maximum of £50,000, I think you might get the occasional win but you can’t rely on it.  Even a £25 win should be seen as a nice bonus.

You don’t get any interest on your investment (your loan to the Government) but you can withdraw your cash at any time.  It is as secure as it is possible to be.

So with interest rates on simple deposit accounts being so pathetically low – some as low as 0.01% – buying some Premium Bonds might be tempting.

You could do a lot worse and I’m sure the Chancellor will be terribly grateful and just to help you on the way, here is the National Savings and Investment website – https://www.nsandi.com/premium-bonds

PS the photo – the old ERNIE – the early computer for randomly selecting the prize bonds.  It is copyright free, so there y’go.

PPS please remember I’m not qualified in any way to provide financial advice – make sure you acquire your own wise advice before making any decisions in the light of this!