Major elements including the huge number of participants and inflation are destroying the returns for investors in national premium bonds.

Inflation and taxes affect investment returns; however, in the last 2 years, the UK premium bonds have been the most affected as investors withdraw their national savings and invest elsewhere. So, where is the money going?

With the current global economy still in doubt following the recession and many investors still unsure about the financial situation of many companies, some investors are still placing funds into ’safe’ options like premium bonds without thinking of other viable options.

imagesWith premium, bonus and lottery bonds, the value of the prize do not rise with inflation. Other corporate or hybrid bond investment schemes have floating interest rates or unlimited return potential and are not subject to a random draw to allocate prizes, which means for most investors, will offer a better return on investment

Tax on investments occurs globally these days as they are classed as a source of income. Tax for most investors will see profits diminish however it is essential for investors to declare earnings from corporate bonds, hybrid funds and hedge funds.

Other bond investments which are rising in popularity as the global recession ends include hybrid funds. Top fund managers IOTA Global Equity, DE Shaw & Co, Bridgewater Associates and Och Ziff offer hybrid and corporate bond funds to maximise returns for both institutional and private investors.