Sold House Funds

kidmugsy wrote: »

Premium bonds?

If the OP had no interest in making a return on their money then premium bonds would be fine, but as they have stated that they do wish to make a return then premium bonds are a useless option.

I can pretty much guarantee that if someone opens a thread asking about good places to get a return on their cash, someone will pop up and suggest premium bonds, even though they don't offer a return, but simply put you into a lottery. :wall:

OP, as Linton has said, on your timescale the best you will get is what the banks are offering on savings. Investing in the markets is far too high risk over a one year period. A combination of the interest paying current accounts, regular savers and, possibly, a one year fixed rate savings bond will deliver the best return. Below is an example based on £50,000:

Current Accounts
Nationwide FlexDirect x2 = £5,000 @ 5% (£244.50)
Tesco x 2 = £6,000 @ 3% (£177.60)
Bank of Scotland Vantage x 3 = £15,000 @ 2% (£297)
TSB Classic Plus = £1,500 @ 3% (£44.40)
Club Lloyds = £5000 @ 2% (£149)
First Direct - To access regular saver (£125 if you can switch an account to them).
HSBC Advantage - To access regular saver (£400 if you can both switch an account to them)

Regular Savers
£15,600 moved into regulars savers in £1300 per month chunks:
Nationwide x 2 = £500 p/m @ 5% (£161.29) N.B. effective rate is 2.69%
First Direct = £300 p/m @ 5% (£96.77)
HSBC x 2 = £500 p/m @ 5% (£161.29) N.B. effective rate is 2.69%

One Year Fixed Rate Bond
Atom Bank = £1900 @ 1.95% (£37.05)

Total Return (exc. switch bonuses) = £1368.90 (Effective interest rate = 2.74%)

Total Return (inc. switch bonuses) = £1893.90 (Effective interest rate = 3.79%)

If you do adopt a strategy like that outlined above, then split the accounts between the two of you to avoid paying tax on the interest.

DrEskimo wrote: »

Is there something to be said about being cautious in opening too many current accounts give the OP is likely to be applying for a mortgage in the next 12months?

Particularly if both the OP and their partner do it?

Possibly, but if they are all opened in the next couple of weeks and no mortgage is applied for until a year is up then it won't make that much difference, especially as their LTV should be good at around 65% on the figures they gave.

eskbanker wrote: »

Just because you have an antipathy towards premium bonds doesn't mean it's valid to dismiss them as 'useless' or to claim they 'don't offer a return'!

In the context of the OP's question they are useless. My reference to them being useless was directly related to the OP's circumstances and requirements. If you read what I wrote, you will see that I actually acknowledged that they could be fine in some circumstances, but not with the OP's desire to maximise their return. You've even quoted where I said it, but here it is again!

If the OP had no interest in making a return on their money then premium bonds would be fine, but as they have stated that they do wish to make a return then premium bonds are a useless option.

The OP did not ask for suggestions which might, possibly, on a good day, with a following wind, and the best wishes of the gods, deliver a sizeable return. Instead, they asked about what they could do to get the best return. The chance of premium bonds delivering such a return would be infinitesimally small.

eskbanker wrote: »

Of course they offer a return,

If you are going to go down that line of reasoning then why don't we start recommending a trip to the casino or the local bookies?

Hey, the National Lottery offers fantastic returns. You could become a multi-millionaire. I know, why don't you buy 25,000 lottery tickets?

Yes, I know that I am being slightly flippant here, but the point is still valid. If we are going to start suggesting that gambling offers a return then we are getting on to a very slippery slope. Chance is not a return on savings or investment.

eskbanker wrote: »

but it's not a fixed and guaranteed return in the same way as a savings account is, but neither is investment and that's not dismissed simply by virtue of not being predictable (there are obviously some key differences between investments and PBs though so I'm not trying to equate them as such).

Two problems here:

1) The OP is asking about a short time scale and, therefore, suggesting investments would be ridiculously reckless.
2) Investments, over the long term are most likely to generate a return, and all historical evidence bears this out, whereas premium bonds have no similar likelihood. If you aren't trying to equate the two then it is probably best not to talk about them in the same sentence. They aren't even vaguely comparable, and writing a sentence such as you have implies that investing is gambling (which it isn't).

eskbanker wrote: »

Yes, of course the return is dependent on luck and some will do better than others, but the effect is mitigated with a large holding for a reasonable period of time, in that this should converge the actual return closer to the theoretical 1.4% (from above or below) by smoothing out the more extravagant variances seen with a small holding for a short time.

The mythical 1.4% is not what someone can expect. 1.4% pertains to the mean payout and the median is far worse.

In the OP's case the holding would not be for a "reasonable amount of time". Their timescale is one year. Surely you cannot think that is a "reasonable amount of time"? And, assuming that you would agree that one year is not a "reasonable amount of time", then you must, surely, agree that in this instance, premium bonds would be a poor choice.

Furthermore, in the case of the OP (which was what my post was actually about), putting the full £50,000 into premium bonds gives them an average chance of winning £500 for that single year that they are looking at, i.e. 1%. Of course they may achieve more, but the odds are stacked against that, and they may achieve less.

eskbanker wrote: »

I'm sure many would consider your suggestion of opening 17 separate accounts as a pretty extreme idea but I don't see anyone shooting it down in flames, just normal floating of suggestions and consequent debating without feeling the need to belittle or dismiss....

It might be seen as extreme (athough there are a significant minority of people who do it), but in the current market more thought and management needs to be given to maximise returns (which is what the OP was looking for!), and it would actually deliver guaranteed returns. Premium bonds would not, and they are, therefore, a poor choice.

My response was directly related to the OP's specific situation. What I said was entirely legitimate in that context. Premium bonds would be a foolish choice in their circumstances. I'm not going to apologise for pointing that out. If someone with the right circumstances came along then I would not hesitate to support the idea of premium bonds, but that is not the case here, and knee-jerk suggestions of premium bonds are not helpful. If a suggestion fails to address the needs of the person asking the question then it deserves, in your words, "shooting down in flames". All opinions and suggestions are not created equal.

I am aware that there are many on this forum (not necessarily you) who have some sort of attachment to premium bonds, and that my dismissing of them, in all but a small minority of circumstances, will not be popular. That does not, however, mean that I am wrong. For the vast majority of people, premium bonds are a poor choice. They are not a savings strategy, they are a gamble (albeit one in which the stake is not at risk).

Everything I wrote was directly targeted at the specifics of the OP's circumstances and should not be read as a general treatise. I shouldn't have to make that clarification, but I have for your benefit.

eskbanker wrote: »

I'm not going to do the whole section-by-section argument thing here (life's too short!) but would just observe that it's not about 'right' or 'wrong' answers, it's perfectly legitimate to suggest PBs in the same way as it is to suggest a large collection of capped-balance accounts, so I'm simply challenging your apparent position that your view is right and others are wrong, especially in the context that OP wasn't looking for either 'best' returns or 'maximised' ones but 'good', which isn't necessarily the same thing as 'maximum guaranteed figure', which in itself is dependent on a number of assumptions....

Firstly, I don't hold that I am always right and I have, on more than one occasion on these forums, acknowledged that I have made a mistake or not considered an alternative that would therefore have resulted in me forming a different view. I haven't said that my suggested approach is the only right way of doing things, and I would welcome alternative suggestions that also deliver a good return, but premium bonds do not, and do not serve the OP's purpose. Your assertion to the contrary is simply not true. My, "apparent position" is down to your interpretation and contrary to evidence elsewhere (including threads you have also posted in) that I am willing to accept when I have made a mistake or overlooked something.

Secondly, the OP very clearly said, "I can’t see any other options with a good return." Premium bonds do not offer a good return for someone looking to save over the course of a year, to add to their available funds for a house deposit. Premium bonds do not meet the criteria. If an IFA advised someone in their situation to put the money in premium bonds then people would rightly say that the advice was bad because, although it protected the capital sum (allowing for the unavoidable impact of inflation), it did not allow for any growth either, and they expressly wanted growth.

I get that you (and several others) don't like me dismissing premium bonds, but that doesn't mean that I am wrong to do so, and where they don't meet the needs of individuals I will continue to do so. They are frequently used as a lazy response to requests for suggestions on what to do with cash balances and the second paragraph of my initial reply addressed this. Indeed, the suggestion to use premium bonds amounted to exactly two words, "Premium bonds?" with no explanation of why this might be suitable. It was a knee-jerk and unconsidered response. There is nothing wrong in calling this out.