The History and Future of Bonus Bonds

Bonus Bonds have been a popular investment option for many Kiwis since their introduction in 1960. The first Bonus Bonds issue was oversubscribed, with over 1 million investors putting in their applications.

The concept of Bonus Bonds was simple: investors would purchase bonds for a set amount, and in return, they would receive a chance to win a share of a monthly bonus pool. This pool was funded by a portion of the bond sales revenue.

The idea was to provide a low-risk investment option that offered the possibility of a significant return, without the need to actively manage the investment. This appealed to many New Zealanders who were looking for a safe and easy way to invest their money.

As the years went by, Bonus Bonds continued to grow in popularity, with the company expanding its operations and introducing new products to the market.

Bonus Bonds were a type of investment where people put their money into a large, low-return fund that paid out interest through monthly prize draws.

You had a very small chance of winning a big prize, only 0.00003% to be exact.

The prizes were awarded monthly, but it's worth noting that the fund itself depreciated over time due to inflation.

To put it simply, investing in Bonus Bonds was a gamble, and the chances of winning a major prize were extremely low.

The Scheme was designed to be a long-term investment, with bonds purchased by investors being held by the Bonus Bonds Scheme for at least 10 years.

Investors were encouraged to hold their bonds for as long as possible to maximize their returns, as the longer they held their bonds, the more chances they had to win prizes.

The Scheme's operators, the New Zealand Government, and the banks that managed the Scheme, were required to keep the money invested in the Scheme, rather than using it for other purposes.

The prizes in The Scheme were a major draw for investors. Each month, a total of NZ$7.9 million was paid out in random tax-paid cash prizes.

To participate in the draw, investors had to purchase a minimum of $20 in bonds and hold them for a full calendar month. The chances of winning were quite low, ranging from one in 9,600 to one in 20,000.

The top prizes were substantial, with one prize worth $1,000,000, one worth $100,000, and one worth $50,000. The average win was around $27.50, giving a tax-free return of around 3.4%.

It's worth noting that 99.996% of bonus bonds returned $0 to their owners in a typical monthly draw.

The Scheme's marketing efforts were quite creative. Comedian Leigh Hart was a key figure in promoting Bonus Bonds in a television advertisement, presenting the bonds as an exciting way to invest.

The catchphrase "the money and the bag" was a nod to It's in the Bag, a long-running New Zealand radio and television game show.

In August 2020, ANZ announced that the Bonus Bonds scheme would be wound up in October 2020.

Low interest rates had a significant impact on the scheme, reducing investment returns and affecting the size of its prize pool.

The decision to wind up the scheme was likely made to minimize losses and ensure a fair outcome for investors.

As you consider your options for accessing your Bonus Bonds funds, it's essential to think about how to make the most of this opportunity. You might be surprised to learn that over half the funds invested belong to those over 65, who are often financially secure enough to pass the funds to the next generation.

Repaying debt is a great way to use your Bonus Bonds funds, especially if you have high-interest loans or credit cards that are weighing you down. This can be a huge weight lifted off your shoulders.

You could also consider keeping the funds in a term deposit or savings account, but be aware that this is rarely a good long-term option. It's often better to explore other investment opportunities that can grow your wealth over time.

If you have a modest sum, spending it might be the best choice for you. This could be a great way to treat yourself or make a purchase you've been putting off.

Investing your Bonus Bonds funds is another option to consider. You could use the money to start or bolster an emergency fund, which can provide peace of mind and financial security.

Here are some options to consider:

In Washington state, veterans' bonus bonds issued under chapter 180, Laws of 1949, can be a great investment opportunity for state funds other than the permanent school fund.

These bonds are specifically authorized for investment by the state, as stated in chapter 180, Laws of 1949. The law clearly expresses its intention to make these bonds eligible for investment by any of the state funds.

The permanent school fund, however, is a different story. According to the Gruen v. State Tax Commission case, the permanent school fund cannot invest in these bonds because they are not a general obligation of the state.

In contrast, other state funds, such as higher educational funds and the Accident Fund of the Department of Labor and Industries, are free to invest in these bonds. This is because the law regulating these funds is statutory, not constitutional.

Chapter 180, Laws of 1949, has superseded any previous statutes that may have limited the eligibility of these bonds for investment by other state funds. This means that any funds of the state, other than the permanent school fund, may be legally invested in the bonds issued under authority of chapter 180, Laws of 1949.