Winning with Bonus Bonds
What were the odds and what next? – Bonus Bonds are being wound up
Since Bonus Bonds started in 1970, hundreds of thousands of Kiwis bought them for themselves or as gifts for relatives. You might have been given some at some point, possibly to lose track of them over the years. Bonus Bonds were started by the government and sold via the post office. In 1990, the bonus bond investment product was sold to ANZ Bank.
Bonus Bonds were marketed as “the much more fun investment” – but, it wasn’t really an investment, and could probably be more accurately described as a safer kind of lottery. A lottery where your “return on investment” comes down to luck, but you still got to keep some of your dollars ‘invested’, after they had been devalued by inflation over the years.
What were Bonus Bonds?
People with Bonus Bonds invested their money in a giant low-return diversified fund that paid out the interest it earned through monthly prize draws, giving bondholders a small chance of winning $1 million each month, or far more likely, one of numerous smaller prizes.
Bonus Bonds had no natural growth, and in fact depreciated over time thanks to inflation. That is unless you were lucky enough to win small prizes frequently, or a big one-off prize – though the chances of that happening were about as unlikely as being killed by a shark. To put it another way, you had a 0.00003% chance of winning a major prize.
But plunging interest rates and a little scandal (in late 2019 an ANZ staffer wrote an anonymous letter to the bank’s CEO and board, describing Bonus Bonds as “the biggest rort in financial services in New Zealand”) have probably contributed to the decision to close it.
Forgotten Bonus Bonds
The nature of Bonus Bonds was that people usually bought them then held them for several years hoping to win a prize. In cases where a customer has died and ANZ hasn’t been informed, then ANZ continue to manage the Bonus Bonds on the basis that the estate will benefit from it when it contacts ANZ. That could well be never, as the law regarding unclaimed monies didn’t apply to Bonus Bonds. For the Unclaimed Money Act to apply, the funds needed to have been unclaimed after maturity. As Bonus Bonds didn’t have a maturity date, they fell outside the definition of unclaimed money. That means that unclaimed money has just built up in the Bonus Bonds system, including forgotten Bonus Bonds.
While people can cash in their bonds now, the scheme will be wound up from “October at the latest”. According to ANZ, “Those who choose to stay during the wind-up phase will have their investments locked in during this process, which may take up to 12 months.”
Bonus Bonds – choices
If you’re a bondholder about to access your funds, you might consider one or more of the following choices:
- Repay debt,
- Keep the funds in a term deposit or savings account (though this is rarely a good long-term option), perhaps to start or bolster an emergency fund,
- Spend it – especially if the sum is modest,
- Invest it, or
- Give it away. Apparently, over half the funds invested belong to those over 65, who might be financially secure enough to pass the funds to the next generation.
As everyone’s situation is different, get in touch to discuss how you could potentially get former Bonus Bonds – or other funds – working better for you.