Premium bonds for children & grandchildren: what are they and how to buy them

What are premium bonds, and why are so many people interested in them? Well, if you are looking for tax-free earnings or perhaps you want a trustworthy means of savings for your children or relatives, premium bonds might be your go-to option.

What are premium bonds?

Premium bonds issued by the UK government’s National Savings and Investments Agency (NS&I) are a non-traditional savings product that dates to 1956. However, it exists in the UK and several other European countries, and it is trusted by 25 million people. Premium bonds are investments placed in a savings account that allows penalty-free withdrawals. 

No interest is earned on premium bonds. Instead, the interest rate funds are placed in a monthly draw, and any prize won is tax-free. Each £1 put into a premium bonds account stands a chance to win a monthly cash prize, from 25 to 1 million pounds. The more £1 bonds you buy, the higher your chances of winning. The odds of winning is 35,000 to 1. Also, note that while most banks only guarantee your savings up to £85,000, your savings with NS&I is in safe hands with a 100% guarantee. Adding premium bonds to an investment portfolio can be it more diverse and balanced. 

What are premium bonds for children?

Premium bonds for children are premium bonds bought by parents for children under 16. The parents or guardians are signatories to the child’s account and are responsible for the account until the child turns 16. Investing for children is very important but tricky, and parents can use premium bonds as a way to get started.

What are premium bonds for grandchildren?

Premium bonds for grandchildren are premium bonds bought by grandparents for their grandchild. The grandparents can invest from £25 to £50,000 on behalf of the grandchild under the age of 16.

How to buy premium bonds

There are three ways to buy premium bonds. You can buy the bonds online, by post, or over the phone. The fastest way to buy premium bonds is online; via the National Savings and Investment (NS&I) website. Over the phone purchases will require your debit card details. If you buy premium bonds through the post, mail in a complete application form and make payment via cheque.

The minimum amount you can invest is £25, while the maximum an individual can have in premium bonds is £50,000. However, it is worth noting that you will need to have your money in the bond for one calendar month before you are eligible for the draw.

How do I buy premium bonds for children under 16?

Parents can invest in premium bonds for children. However, children under the age of 16 are not allowed to buy premium bonds, so their parents have to be custodians of their premium bonds.

Buying as a parent

You can buy premium bonds for your children over the phone, online or by post. While filling out the application form, a section must be filled with the parent or legal guardian’s information. The parent will oversee the premium bonds for the children until the child reaches the age of 16. Once the child turns 16, the premium bond is transferred to the child.

Buying for someone else’s child

If you want to buy premium bonds for someone else’s child, you need to apply via post or online. When filling out the form, you need to input the nominated parents’ or guardians’ details. You will get a message confirming your investment, and you can also request a paper gift card to show the child or their guardian. Even though you bought the premium bond for the child, only their consented guardian can manage the premium bond account.

Can grandparents buy premium bonds for grandchildren

Yes, grandparents can gift premium bonds to their grandchildren. How to buy premium bonds for grandchildren is relatively the same way as explained earlier, and unless the child is above 16, their nominated guardian will oversee the premium bond account.

What happens to premium bonds when the child reaches 16

Once the child turns 16, they will take over the premium bond savings account and become responsible for the savings account. The premium bonds account can be accessed and managed online. However, before the 16-year old can own their account, they need to fill out a registration form because the NS&I, home to premium bonds, needs an address and a witness to the child’s signature as evidence of identity.

How to top up your child’s premium bond account

You can purchase more premium bonds for children once they already own premium bonds. You can buy more bonds online or by telephone. You can also buy bonds online using a bank transfer, but you can set up a standing order with your bank if you want to top up regularly. For your child’s premium bond account, each minimum deposit is £25.

How to transfer investments to premium bonds

You can transfer investments from any of your NS&I accounts to your premium bond. If the premium bond transfer is for your child, the account must be in the child’s name, and you must be the parent or legal guardian responsible for the account. You can fill out an online form or send NS&I the necessary information via post.

Why choose premium bonds for your children

Apart from a junior ISA, premium bonds for children are one of the safest gambles you can take if you are looking to set your kids up before they turn 16. Premium bonds might not earn any interest, but you get the chance to win £1 million while the principal amount is safe. A 2021 statistics showed that over 100,000 children under the age of 16 have a premium bond account. You can also get them for someone else’s kids, although not without the guardian’s knowledge, as you would need to fill in the address and date of birth for yourself, the child, and their guardian.

The details on prizes won or any other transaction will be sent to the guardian or responsible parent until the child turns 16. First-time registration of premium bonds could take about 2-3 days before your account is active. Always consult with a financial advisor to determine whether premium bonds are a good fit for the investment strategy for your child.

FAQ

How many Premium Bonds can a child have?

Parents, grandparents and family members can buy premium bonds for a child, and a child’s account can have multiple guardians linked to it. However, the total amount a child can have in premium bonds is £50,000. 

What happens if your child wins premium bonds?

Once a child wins the jackpot, the money goes to the parent or guardian in charge of the child’s account. The parent or ‘responsible person’ looking after the child’s bond will determine what to do with the prize money.  

Are Premium bonds safe and secure?

Yes, premium bonds are safe and secure. Premium bonds are authorised and regulated by the Treasury and backed by the government. So your money is 100% protected, and the amount you put into a premium bond is the amount you are paid back.