Thoughts on Premium Bonds
- Thread starter William_Montgomery
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They’re as secure as it gets.
They can be worth it if you are in the higher income tax bracket, and if you have already maxed out your ISA allowance for the year.
The actual annual earnings on them on average are about 4%, but you can earn under that too. Though any gains are tax free, and if you’re lucky you could win up yo £1,000,000, though I believe the odds of that are even worse than the lottery.
They can be a good place for an emergency fund as they are fairly quick access and government protected so no risk of losing it unless we have far, far bigger problems.
They can be worth it if you are in the higher income tax bracket, and if you have already maxed out your ISA allowance for the year.
The actual annual earnings on them on average are about 4%, but you can earn under that too. Though any gains are tax free, and if you’re lucky you could win up yo £1,000,000, though I believe the odds of that are even worse than the lottery.
They can be a good place for an emergency fund as they are fairly quick access and government protected so no risk of losing it unless we have far, far bigger problems.
I’ve had £10 for sixty five years and not a squeak. That ten pounds could have bought an old motorbike back then …….. And if I’d kept THAT!!!!!
To save money it would have to be at a rate where it doesn't just combat and keep level with fiat based inflation ( losing its value year upon year ) of currency but exceed it.
Ideally you want whatever the investment / saving is to exceed this figure ( if you believe its veracity )
Inflation and price indices - Office for National Statistics
The rate of inflation is the change in prices for goods and services over time. Measures of inflation and prices include consumer price inflation, producer price inflation and the House Price Index.
www.ons.gov.uk
As an eternal lottery ticket they can be useful.
Premium Bond Probability Calculator. Unique tool predicts what you'll win plus NEW 'luck test'
This free tool delves into the Premium Bond probability to reveal the real odds of winning based on the bonds you have. Plus tell it what you've won in the past and it shows whether you're Mr Luck or have had a black cat cross your path. Developed with help from post-doctoral probability...
www.moneysavingexpert.com
I have them, and I seem to win something every month.
It's a perpetual lottery ticket that you can get your money back, in full.
Max is £50,000 and then they just put any winnings into another bank account that you have to give them details for.
Is it worth it ?
I think so.
I have maxed out simply by letting my winnings buy more bonds. I think I started with £14k and though I did buy more, mostly it was the winnings slowly adding up.
I have not worked out whether I'd do better in a high interest bank account, but there's the luck factor and the quiet Hmmm when I win
M
It's a perpetual lottery ticket that you can get your money back, in full.
Max is £50,000 and then they just put any winnings into another bank account that you have to give them details for.
Is it worth it ?
I think so.
I have maxed out simply by letting my winnings buy more bonds. I think I started with £14k and though I did buy more, mostly it was the winnings slowly adding up.
I have not worked out whether I'd do better in a high interest bank account, but there's the luck factor and the quiet Hmmm when I win
M
I'm not a financial advisor, I just play one on the internet...
so take the following with a pinch of salt....
Clear all credit card debt first. Then in no particular order
save up 6 months of cash as a fail safe from loss of job.
ISAs for tax free savings
Double pay mortgage payments
Precious Metals
Premium Bonds
your priority list may vary when one or more on the list is fulfilled add that money into one of those remaining.
so take the following with a pinch of salt....
Clear all credit card debt first. Then in no particular order
save up 6 months of cash as a fail safe from loss of job.
ISAs for tax free savings
Double pay mortgage payments
Precious Metals
Premium Bonds
your priority list may vary when one or more on the list is fulfilled add that money into one of those remaining.
The wife and I have some/enough each. We win something most months and that pays for treats like meals out. On good months we get weekends away out of the winnings. The Bonds are also very flexible - easy to manage online, easy to add to, easy and quick to get your money back. As previously mentioned they are state backed and so should be a fairly safe place for your money.
Martin Lewis's premium bond calculator is very useful for working out your likely returns and seeing how they compare to cash savings:
www.moneysavingexpert.com
(Looks like the rates may be slightly out of date though.)
You want to be putting in a reasonably large amount, for a reasonable time, to even out the random element and get somewhere close to the average return - probably at least £10k for couple of years or more.
Then it comes down to how much benefit you'll get from the fact that the returns are tax free. As Chris referred to, if you're not maxing out your ISA allowance, then that will probably be a better bet (whether cash or stocks & shares). If you are maxing out your ISA allowance, and you're a higher rate tax payer, then you can get to the point where premium bonds will probably beat any bank account.
The odds of getting a big win on one bond in one month are pretty astronomical, beyond lottery odds, but with premium bonds you're in the draw every month for as long as you like, and you get your pound back at the end! According to the Martin Lewis calculator, if you hold £50k for 5 years, your odds of winning a million are about 1/21,000.
Premium Bond Probability Calculator. Unique tool predicts what you'll win plus NEW 'luck test'
This free tool delves into the Premium Bond probability to reveal the real odds of winning based on the bonds you have. Plus tell it what you've won in the past and it shows whether you're Mr Luck or have had a black cat cross your path. Developed with help from post-doctoral probability...
www.moneysavingexpert.com
You want to be putting in a reasonably large amount, for a reasonable time, to even out the random element and get somewhere close to the average return - probably at least £10k for couple of years or more.
Then it comes down to how much benefit you'll get from the fact that the returns are tax free. As Chris referred to, if you're not maxing out your ISA allowance, then that will probably be a better bet (whether cash or stocks & shares). If you are maxing out your ISA allowance, and you're a higher rate tax payer, then you can get to the point where premium bonds will probably beat any bank account.
The odds of getting a big win on one bond in one month are pretty astronomical, beyond lottery odds, but with premium bonds you're in the draw every month for as long as you like, and you get your pound back at the end! According to the Martin Lewis calculator, if you hold £50k for 5 years, your odds of winning a million are about 1/21,000.
Thanks for all that input. Providing the money is easy to access and is secure, it sounds like it could be a good option to store emergency funds for a short time.
I won't hold out too much hope for a million quid though.
I won't hold out too much hope for a million quid though.
By all professional reckoning that I have seen, you are likely to get better returns by putting your money in a cash ISA. If you're prepared for higher risk, you may get substantially more in a stocks and shares ISA which is tax free and accessible in a few days. Depending on your selected portfolio, a medium risk S&S ISA can deliver 15%+ per annum. Obviously, you don't have the excitement of a potential £1m win though
(investments can rise and fall in value)
(investments can rise and fall in value
)
Contrary to popular belief, Premium Bonds are not safe unless you're winnings beat inflation, and the majority of Premium Bond holders do not beat inflation. Pattree's comment is a perfect example. In 1960, £10 probably wasn't far off a weeks wage yet today It's less than an adults minimum wage for one hour. The number of GBP he 'invested' in 1960 might not have gone down, but it's value has, and the end result is the same, less purchasing power.
Premium Bonds might make more sense as a short term savings pot when interest rates were near zero but when you can get a guaranteed 5%~ they make a lot less sense. long term, they are a very poor investment choice. They are an especially poor choice for children who have the advantage of time and with time comes the opportunity for exponential compounding effect.
Long term, my choice would be to diversify across multiple indices, and physical precious metals. Gold has actually been beating the returns of the indices since 1999. I buy Silver and Gold bullion as often as I can afford to. Gold is a better investment choice as it's VAT free. There is now VAT on Silver since Brexit. But you can buy a 1oz Silver coin for a little over £30 so they are a bit more affordable. I buy 1oz Silver coins for my niece and younger sister for Birthdays and Christmas instead of toys.
Are you moving to Scotland? I would love to. My girlfriend wouldn't, though. So the plan is to move further towards North Wales when we can afford to.
Need to keep an eye upon CGT also.
Bullion & Capital Gains Tax (CGT) | The Royal Mint
Discover more on capital gains tax and how it applies to bullion investments.
www.royalmint.com
