My Lords, premium bonds are a popular savings product. They date back to 1956 and were introduced by Harold Macmillan, the Chancellor of the Exchequer of the day. They provide a way for government to raise debt financing through the retail savings market. Depending on the Government’s financing requirement, NS&I promotes sales through its website, through direct correspondence with customers, through media coverage and through advertising.
My Lords, is it not time, after 60 years, to look again at the rules and aims of premiums bonds? Specifically, why cannot clubs, societies and charities own premium bonds? Could not those who win, say, £25 but do not wish to receive that prize have it designated and directed to a national charity by ticking a box? More radically, could we not think about reconstructing and converting premium bonds into something perhaps rather more popular, such as national care bonds? I think that would generate much greater public support, particularly if the unclaimed prizes were hypothecated to the care sector.
My Lords, that is for a debate, not a Question. I am not a fan of hypothecation. The Government raise premium bonds to fund government expenditure, as I have explained, and obviously there is nothing to stop anybody giving their tax-free winnings to charity as they see fit. We do not have any plans to introduce a direct transfer to charities, which would require stakeholder consultation and a systems change. The product is a good part of the portfolio of savings products that we have and, as I said, it is very popular.
We try to make sure that premium bonds are a reasonable deal in the market for savings. The noble Lord will probably know that we delayed reducing the rates on premium bonds until quite recently. They continue to be popular, and it makes sense to look at them in the round, aiming for a balance for savers and taxpayers, as well as stability in the sector, obviously, in which they have a role as part of NS&I’s work.
My Lords, will the Government consider giving pensioners who are eligible for the winter fuel payment the option of electing to receive premium bonds instead of a cash payment, thereby helping to meet the Government’s funding requirement and reducing the cash call on government?
That is another innovative idea for premium bonds. I will certainly think about it, but the basic point about premium bonds is that they have to be part of a portfolio of sensible savings, such as the investment bond that we are bringing in. That seems to me the right way to go. They are popular and successful, and they give people a bit of excitement, as well as easy access to saving, and there is a 100% Treasury guarantee.
My Lords, every statistician and financial adviser can establish that premium bonds are a pretty poor deal, and the Government are in the business of reducing the rate yet again, so the deal is not getting any better. What they are is a flutter but, as my horse will fall at the second fence in the Grand National in the fairly near future, I am not going to argue against gambling at this point.
I think we can agree on the excitement, but there is also a more serious point underlying this. When you are choosing how to save, you need to look at a number of options, which we have debated here in this House, including having a pension through the auto-enrolment system and taking advantage of other savings products such as ISAs and so on. I see premium bonds as a very important part of the savings market. And I am so glad that the noble Lord likes to have a flutter.
My Lords, I exclude my noble friend Lord Lee from this but many people who purchase premium bonds also have an adverse amount of credit card debt or personal loans outstanding. They are attracted rather to the prize element of the premium bond. Would it be sensible to have on the website some advice to encourage people to think first about paying down their debts before they go for a low-interest savings product?
As I said, it is important that people have choice and look at a sensible way of saving. Having material on different websites is important but, in the round, we try to make sure that government advice gives people a sound sense of direction on savings, including what is good value for money. Again, I emphasise the point about pensions: investing in a pension is a very good form of saving.
My Lords, would my noble friend look at the rules, which, while respecting the importance of avoiding money laundering, make it extremely difficult for grandparents and others to gift premium bonds to young children? That would be a very useful way of encouraging saving.
My Lords, I am not sure whether the Minister is old enough to qualify for the silly £10 a year Christmas bonus that most of the people in this Chamber will receive. Apparently it was introduced decades ago and if it had been updated with inflation it would now be worth £187 a year. Building on the suggestion of the noble Lord, Lord Lansley, why should that not be converted into savings rather than paid out, when many people do not know what it is about, why they are receiving it or what they do with it?
The noble Lord highlights that there are many good pension benefits in this country. I take his point but this is a difficult area in which to make sudden changes.