Have you ever wondered what happens to your premium bonds after you pass away? Premium bonds are a popular savings product, and the idea of what happens to them after you pass away can be a tricky one to wrap your head around.
Here, we'll take a look at what premium bonds are, how they work, what happens to them after you die, how to claim premium bonds after a death and whether you need probate. We'll also look at the importance of keeping your bond information up to date, as well as how to claim any prizes won.
Premium Bonds are a type of savings product offered by the UK Government HM Treasury via the National Savings and Investments (NS&I) organisation. They are very popular and over a third of the UK population owns premium bonds. They are a form of lottery, rather than an investment per se, but the term investment is often used. The bonds are also held in your name, and you can access the money you've invested any time. In other words, you can withdraw all or part of your money invested. It is easy to buy premium bonds UK, and even easier these days as there is an option to purchase premium bonds online.
Premium bonds, also known as premium savings bonds, or national savings bonds, are a type of savings product known by many folks as the National Savings and Investment scheme. The premium bonds are held in your name, and you can withdraw the money you've invested at any time.
Premium bonds can be considered an asset like a bank account or a building socet account, but unlike a bank account or building society account, all premium bonds are held with the government under the auspices of the NS&I.
It is very easy to buy premium bonds, especially with the digital options now available allowing you to buy premium bonds online. The bonds are also entered into a prize draw every month, where you can win monthly prizes ranging from £25 to £1 million tax-free. The tax free prizes are drawn at random and you are not guaranteed to win anything in the monthly prize draw, but the bonds can still be a great way to save money in a safe and secure way.
ERNIE, or Electronic Random Number Indicator Equipment, is what powers Premium Bonds. The monthly draw is purely random, so every bond number, whether it has 8, 9, 10 or 11 digits, has an equal and separate chance of winning.
It was a Bletchley Park code breaker who invented the first ERNIE in 1956. Later that year, Prime Minister Harold Macmillan launched Premium Bonds, giving everyone an alternative means of saving money. With advances in technology, each generation of ERNIE has become faster and more powerful and the speed of premium bonds drawn gets quicker each time.
ERNIE generates random numbers using something called a quantum random number generator, and these numbers are then matched against all eligible Bond numbers to determine the monthly prize winners.
Premium bonds are a great way to save money in a safe and secure way, and they offer a chance to win big prizes without taking any risks. There is a monthly prize draw and the odds of winning are a very respectable 24,000 to 1 and you can win prizes ranging from £25 to £1 million tax-free. Naturally you stand more chance of winning a smaller amount - and joining the ranks of previous lucky bond holders. So the monthly draw is like a lottery, but there is a big difference to the national lottery where if you buy a national lottery ticket and do not win, your stake money is gone whereas with premium bonds, you can get your stake money back. The monthly prize draw offers many tax free cash prizes, and for a number of reasons, including a decent prize checker app, there are very few unclaimed prizes.
They have an attractive tax free prize fund rate and the prizes range from small to substantial and remember that you can win tax free prizes every month in the prize draw so people often regularly buy premium bonds to top up what they arleady have, to improve their odds of winning. Remember you don't have to pay tax on your winnings - the winnings are free of UK income tax and also Capital Gains Tax - that's the way premium bonds work.
Premium bonds are not an asset that simply be inherited or transferred into someone else's name.
There are two options in respect of dealing with them by the Executor(s). Option 1 is to sell them during the probate process, and the money raised from their sale then becomes part of the estate ready for inheritance by the specified beneficiaries. This is the quickest way of dealing with the issue. Option 2 is to leave them in situ for a year, during which time they are still elgible for cash prizes. After a year has elapsed, the Executor or the nominated beneficiary will need to conatct NS&I to claim any prizes and to cash out the bonds. Waiting a year can of course delay the inheritance of funds, but it could lead to more money overall, if prizes are won during that year. The Exceutor should liaise with the beneficiaries to decide which of the two options is best, as each option has its merits.
Within your Will you can choose to gift the ownership of your premium bonds to a surviving relative or friend, or a charity if you wish.
If you choose to gift your premium bonds, and thus transfer ownership, the relative or friend will then be able to continue to hold the bonds and any prizes won will be paid out to them. It is important to note, however, that any prizes won prior to the transfer of ownership will not be paid out to the surviving relative or friend.
Any winnings will form part of a person's estate and may be subject to Inheritance Tax. The Executor in charge of administering a person's estate will need to check whether the deceased person's estate includes premium bonds, as part of calculating the net value of the estate.
Most people keep their old style premium bonds safe and sound and keep them with important information like pensions and life insurance policies. Newer style premium bonds will typically be online only, and there is a mechanism for both styles of premium bonds to be cashed in after a death, whatever the premium bonds worth.
Your premium bonds can be transferred to a surviving relative or friend, or to a charity as already stated. To be eligible to claim the bonds, the person you are transferring them to must be 16 or over and have a valid UK address.
If you are transferring your premium bonds to a charity, then they must be a registered charity and have a valid UK address
If you choose to transfer ownership of your premium bonds to a surviving relative or friend, then NS&I will need to be contacted and provided with the necessary information. This information includes the surviving relative or friend's name, address, date of birth and National Insurance number.
The executor(s) of your Will will also need to provide proof of your death. This can be by providing a copy of the death certificate. Once the transfer has been completed, the surviving relative or friend will then be the new owner of the bonds and any prizes won will be paid out to them.
When two people hold bonds jointly, as is often the case since joint savings accounts were promoted as sound financial planning advice in the past, especially for tax savings purposes, the surviving bondholder will become the sole owner. A death certificate should be provided as proof that the other bondholder has passed away.
If the Executors choose to cash in your premium bonds after you pass away, then they will need to contact NS&I and provide them with the necessary information. This information will include the deceased's name, address, date of birth and National Insurance number.
If the premium bonds are cashed in, the proceeds of the premium bonds will be added to the estate of the deceased. The proceeds will be distributed according to the Will, or if there is no Will, according to the laws of intestacy. In the event that premium bonds are kept invested, the executor or next of kin will become the new bondholder, and they will be eligible to win tax-free prizes in the prize draws just as the original bondholder was.
If the deceased person was a monthly prize winner, any prize money due to them before their death will be paid to their estate, In the event of a prize win following the death of a bondholder, the prize money will be paid tax free to the new bondholder, typically by bank transfer to a UK bank account.
If your bonds are not claimed within 12 months of your passing, then the money you've invested will be returned to NS&I. The unclaimed bonds will then be held in the Unclaimed Premium Bonds Account and can be claimed at any time.
It is important to note, however, that any prizes won prior to the transfer of ownership will not be paid out to the surviving relative or friend. The unclaimed bonds will also be held in the Unclaimed Premium Bonds Account and can be claimed at any time.
It is important to keep your premium bonds information up to date, as this will ensure that any prizes won will be paid out to the correct person. It is also important to update your information if you move house, change your name or if any of your personal details change.
You can update your information by contacting NS&I and providing them with the necessary information. This information includes your name, address, date of birth and National Insurance number. You can also update your information online by signing in to your NS&I account.
Probate, or a Grant of Probate, is a legal document that grants the Executor with the right to administer an estate of a deceased person. It is not needed for every death, as there are thresholds relating to the value of an individual's estate, so if the estate has a low value then the assets can usually be sold or transferred without the need for probate.
Whether or not probate is needed to cash in the premium bonds depends on the value of the bonds owned by the deceased. The current limit is very low so if the deceased owned more than £5,000 worth of premium bonds, probate will be required.
Where a grant of probate is needed and has been obtained, the Executor or next of kin will need to provide NS&I with a copy of the grant of probate, as well as the completed claim form and any other necessary documentation. NS&I will then transfer the premium bonds to the Executor or next of kin, or whoever is named as the giftee of the premium bonds in the Will, who can decide whether to cash them in or keep them invested. It is important to note that the Executor or next of kin will be responsible for any tax liabilities arising from the bonds.
If somebody dies without a Will, a Grant of Probate is known instead as Letters of Administration, which grants the same legal rights in respect of administering the estate. In these cases, the person responsible with dealing with the estate is known as the Administrator.
It is a good idea to declare your premium bonds in your Will and you can choose to gift them to an individual if you so wish. This is just one of many features available to you if you write your Will online with our award wining online will writing service.
Understanding what happens to your premium bonds after you pass away should now be easier to understand.
Remember to keep your premium bonds information up to date, as this will ensure that any prizes won will be paid out to the correct person. It is also important to update your information if you move house, change your name or if any of your personal details change.