Savings or leave in Premium Bonds

ejsaunders

My fiancee wants me to ask a question so here goes - I already have an ISA and cannot choose between premium bonds and a savings a/c.

I have £2k in premium bonds which I do not win off very often, last two years I have won a max of £75. Your site says you are 90% unlikely to get a better return than from a savings account, although, some people say the longer you leave them in the better chance you have. Given that at the moment, the rate of return is not amazing, and you pay no tax on PB, I'm just unsure of which is better.

I am unsure whether to cash them in and use them in a savings a/c or to leave them there and use new investment only in a savings account, or leave a specific amount in the PB and move the rest to the savings account. What do you suggest?

MikeR71

Well with the interest rates being so low currently, you might as well try your luck with premium bonds. You never know, but I once had as much as £7000 in premium bonds and in nearly 5 years only won £250 in total. At the time interest rates in ISA were nearly 6% so I could have had more from ISAs.

dunstonh

although, some people say the longer you leave them in the better chance you have.

Technically that is correct on the assumption being that the more draws you take part in the more likely you are to win. Its like saying if you roll a dice once you may get a six but if you roll it 10 times you are more likely to get a six.

Premium bones are largely a complete waste of time for small savers. The odds of winning anything decent are low and if you get average then you end up with less than most savings accounts.

Ask yourself this. If you had the money in a savings account paying interest, would you draw the interest out each month and go by scratchcards with it? That is effectively what you are doing with Premium bonds

xrjtg

dunstonh wrote: »

Technically that is correct on the assumption being that the more draws you take part in the more likely you are to win. Its like saying if you roll a dice once you may get a six but if you roll it 10 times you are more likely to get a six.

But you don't need to get just one six—you need to get an above average number of sixes. If you do worse on average with Premium Bonds (which you do), then to outperform over a longer term you need a more unusual result than you do to outperform over a short one (which you might do by winning £50 in the first month you are eligible).

I agree with your general sentiment of course—there's just no need to make that concession!

Person_one

It depends on how much of a gambler you are really! The interest on 2k at the moment isn't going to be anything spectacular so if you're happier taking a chance that you might get a big win I'd leave them in Premium Bonds.

I have 15k in Premium Bonds, I need to keep relatively instant access so a 3 year fixed account wouldn't work for me, and I quite like the idea that I may, however small the possibility, get an impressive windfall. What other way can you gamble and keep your stake?

xrjtg

As dunstonh suggested, depositing into a normal savings account and using the interest to buy lottery tickets. With the right account this has both a better expected return and a higher chance of winning a big prize (a million pounds or higher).

ESKIMO

As regards to premium bonds check out the dedicated MSE Thread here https://forums.moneysavingexpert.com/discussion/510305

The only 'issue' i would just like to add to dunstonh's valued post is that unlike 'gambling' you 'technically' never 'lose' as your investment is tied up.

You are, however, relying on your 'raffle ticket numbers' coming up to win anything from a 'measly' £5 to a much welcom cool £1m.

Subsequently you have odds of winning at least 'something' in premium bonds as opposed to potentially constantly spending £1+ every week on the Lotto/Euro Millions which you can never see again with the added fact your odds of winning are significantly reduced (which is respective of the potential jackpot accrued).

ariba10

You could put it in a Nationwide ISA and get 0.5%

ejsaunders

Thanks all, she eventually went with an online saver after the Halifax went tits up and 'stole' her money for 7 days. Banks!