Innovations in Savings Schemes

Bonus Bonds were introduced into New Zealand in March 1970 based on the Premium Bond savings scheme operating in the United Kingdom. A Bonus Bond is a unit in the Bonus Bonds Trust with all incomefrom the trust's conservative investments being balloted for on a monthly basis by the bond homers. This paper looks at the history and operation of the Bonus Bonds savings scheme in New Zealand and examines why it has such wide appeal for New Zealanders. The paper also addresses the following aspects of the scheme. Performance of the bonds; their level of success as a savings vehicle; factors contributing to their relative success over time; the risk profile of the bond holders. The major findings of the paper are that investors in Bonus Bonds have little appreciation of real values and they view the bonds as an appropriate investment for risk averse investors.