Premium Bonds are a unique type of investment issued by the UK government. They were introduced in 1956 as a way for the government to raise funds for public spending while giving individuals a chance to win tax-free prizes. Since then, they have become one of the most popular forms of savings in the UK, with over 21 million people holding them.
The idea behind Premium Bonds is that instead of earning interest on your investment, you are entered into a monthly prize draw. Each bond you hold is given a unique number and is entered into a random draw for a chance to win one of many prizes. These prizes range from £25 to £1 million and are paid tax-free.
What are Premium Bonds?
Premium Bonds are a type of investment that can be purchased from National Savings and Investments (NS&I), a UK government-backed savings provider. The bonds are available in denominations of £25, and you can purchase them online, by phone, or by post. The minimum investment is £25, and the maximum holding limit is £50,000.
When you purchase a Premium Bond, your money is held by NS&I and is entered into a prize draw. Each bond you hold is given a unique number, and every month, a computer selects numbers at random. If your number is selected, you win a prize, tax-free. The prize money is paid directly into your NS&I account.
What happens to Premium Bonds after you pass away?
Premium Bonds are like other investments, as they do form part of your estate when you die. This means that if you hold Premium Bonds and you pass away, they Will be included in your estate for inheritance tax purposes. For this reason, it is important to know what happens to your Premium Bonds after your death.
If you hold Premium Bonds and you pass away, your executor or administrator Will need to notify NS&I of your death. They Will need to provide NS&I with the necessary documentation, including a death certificate and the grant of probate or letters of administration.
Once NS&I has received this documentation, they Will freeze your Premium Bonds account. This means that no further prize draws Will take place, and no further bonds can be purchased. Your executor or administrator Will then need to decide what to do with your Premium Bonds.
Transferring Premium Bonds to a beneficiary
If you want your Premium Bonds to be transferred to a beneficiary after your death, you can nominate them when you purchase the bonds.
If you have not nominated a beneficiary, your executor or administrator Will need to decide what to do with your Premium Bonds. They may choose to cash them in and distribute the proceeds to your beneficiaries or transfer them to a new owner.
Premium Bonds and inheritance tax
Premium Bonds held by an individual who has passed away are generally included as part of their estate for inheritance tax purposes in the UK.
It's worth noting that in the UK, inheritance tax is generally only paid on the portion of an estate that exceeds the current inheritance tax threshold, which is £325,000. If the value of the estate, including any Premium Bonds, is below this threshold, then no inheritance tax is payable.
Managing Premium Bonds in estate planning with Wills Services
If you are considering using Premium Bonds as part of your estate planning, it is important to seek professional advice. As specialists in probate and estate administration, Wills Services offers a wide range of estate solutions to cater to your needs. From obtaining the Grant of Probate to providing comprehensive estate administration services, we are equipped to manage the deceased's property and assets, including valuable investments such as Premium Bonds. With our expertise, we can take on the financial and legal responsibilities involved in the process, leaving you with peace of mind during a difficult time.
Contact us today for more information and advice using the simple form below.
