Premium Bonds or Savings Account?

chippydog

Hi all

I have £10,000 in a savings account and would like to know which would be best? Can i lock it away in a high interest account (it will be un touched for at least 12 months) or invest it in Premium Bonds?

Stompa

You'll probably get a higher return in a savings account.

Cautious_Investor_3

Hi

I cannot give advice but I would tend to agree.

Premium bond returns are of course tax free, but the interest is variable and currently rather low, certainly averaging below inflation.

Why not go for a Cash ISA offering a one year fixed rate?

The Cautious Investor

opinions4u

For a direct comparison of value, Premium Bonds pay 1.5% tax free. This is distributed randomly, with some bonds earning £1m in a month and most earning nothing!

So if you're a basic rate taxpayer you need to achieve a gorss rate of 1.88% or more to beat this. A 40% taxpayer 2.50%. A 50% taxpayer 3.00%. Or an ISA paying 1.51% or more!

www.moneyfacts.co.uk/savings will help you identify best buys in cash ISA and easy access savings.

Perhaps a savings account for the capital and then bang the interest in to PBs when it's paid next year.

Stompa

opinions4u wrote: »

This is distributed randomly, with some bonds earning £1m in a month...

Make that "...with one bond earning £1m in a month"!

Loughton_Monkey

chippydog wrote: »

Hi all

I have £10,000 in a savings account and would like to know which would be best? Can i lock it away in a high interest account (it will be un touched for at least 12 months) or invest it in Premium Bonds?

My wife and I held the full £30K each for just over 2 years. Our 'winnings' were all £50, and the occasional £100, making a combined income roughly in line with their advertised "rate" - which is none too good compared with normal savings accounts, even allowing for tax free status of winnings.

We have now reduced our holdings down substantially, and my own £5,000 (now) has produced absolutely nothing in the last 12 draws. My wife received 4 lots of £25, making 1% between us.

Premium bonds are a pure gamble. You might just pick up £1,000 if you are exceptionally lucky, but almost certainly won't. I would advise locking it away (getting 3%-ish if you shop around). Fill your ISA (as has been sugggested) if you don't have one so that the interest is tax free.

Premium bonds - if they have a place at all - are best used for a small percentage of your investments, simply to add a liitle bit of 'spice' to what is otherwise a very boring savings market!

slinga

Agree with the above poster.
Had £3000 in Premium Bonds for20 years and have as yet to receive more than £50 return in a year.
Many years without any return.
Dunno who's got my winnings.