What Is a Lottery Bond?

A lottery bond is a government bond most famously issued by the United Kingdom's National Savings and Investments. This type of bond gives the holder a chance to win a random monthly drawing for a tax-free cash prize and allows the government to raise money. The bonds do not pay interest, but they do encourage saving. These bonds are government-backed so they are considered safe. But like 澳洲幸运5官方开奖结果体彩网:zero-coupon bonds, they are not p🌳rotected against inflation. Lottery bonds are also available in other countries.

How Lottery Bonds Work

A bond is a 澳洲幸运5官方开奖结果体彩网:debt security. Bond issuers sell them to raise money from investors who receive interest payments at regular intervals. The principal balance is paid back by the issuer by the matur💖ity date. These investments come in various shapes and sizes, including corporate, municipal, and government bonds.

Lottery bonds are one type of government bond commonly sold in the United Kingdom. They are available for purchase through the post office of the National Savings & Investments, which is a government-owned savings bank. These bonds are not legal for sale in the United States. Introduced in 1956, they were used as a way to reduce 澳洲幸运5官方开奖结果体彩网:inflation and generate investments from individuals who weren't otherwise interested in saving.

U.K. lottery bonds are officially referred to as 澳洲幸运5官方开奖结果体彩网:premium bonds. Each is worth £1. The minimum investment is £25, and the maximum amount to pay into it is £50,000. These bonds allow investors to receive tax-free (income and capital gains) prizes every month, where the odds of winning are 24,000 to 1. The interest rate is 3.70%, which is the annual prize fund rate.

These investments are designed for indiv⭕iduals who want to win tax-free prizes of up to £1 million and have the minimum🔥 amount to invest. Investors can also purchase lottery or premium bonds for children under the age of 16. But they are not geared toward people who:

• Want a steady income stream
• Expect guaranteed returns
• Are worried about inflation

Special Considerations

Lottery bonds are also sold in countries outside the United Kingdom. After the British government saw success by issuing them as a means to promote savings, other countries followed suit. New Zealand issued its lottery bond, called Bonus Bonds, in 1970.

When New Zealanders buy Bonus Bonds, their money is pooled with other bondholders and invested in fixed-interest assets and cash equivalents. The interest earned on these investment products is the basis for 𒊎funding the prizes awarded to winners. The funds also maintain the principal investment value of the non-winners bonus bonds.

New Zealand stopped issuing new Bonus Bonds as of Aug. 25, 2020. The program ended after the 澳洲幸运5官方开奖结果体彩网:low interest rate environment caused the prize pool to drop.

How to Win With Lottery Bonds

The National Savings and Investments uses a machine called Electronic Random Number Indicator Equipment or ERNIE to generate winning bond numbers each month. ERNIE uses quantum technology to randomly draw numbers. It takes the machine 12 minutes to come up with each month's winners.

The number of prizes allotted each month varies based on the total number of 🅺participants. The table below highlights the prizes available:

The National Savings and Investments has given out 621 million prizes to bondholders since the first drawing in June 1957 worth about £25.7 billion.

Example of Lottery Bonds

As noted above, lottery bonds are common in the United Kingdom. But they are also available for purchase in other countries. For instance, Sweden's National Debt Office issued lottery bonds as a way to reduce the central government's debt. They were also considered to be a form of tax arbitrage by wealthy investors for many years.

Drawings took place two to three times per year. Prize amounts had a fixed or floating base and were tax-free. Bonds came with a face value of SEK 500 to SEK 1 000 and matured anywhere between one to five years. First issued in 1918, the government put a pause on its lottery bonds in 2016 with no plans to continue the program. The final bonds matured in 2021.

The Bottom Line

Lottery bonds are typically designed for people who aren't savers. Rather, they're meant for people who want a small, risk-free investment with a bonus: the chance of winning a tax-free prize. These bonds are worth a nominal amount and only require a small investment. Lottery bonds are available for purchase in many countries—notably in the United Kingdom. But they aren't up for sale in the United States.