Premium Bonds: Are they worth it? Discussion Area

edda

belto wrote: »

My wife and I are of retirement age although we still work for sanity and income.
We have £54K in PB with no great wins only £50_£100 now and again. this is our Pension fund
It would seem from this thread to cash them all in and transfer to High interest rate.
Where and what would be the best investment for growth in the fund.

The statistics are too complicated for me to work out, but Martin's article is concerned only with 3 groups of people - non taxpayers, basic rate and higher taxpayers.

What about those aged over 65 or 75? They get an increased age allowance for tax purposes. This allowance is reduce by £1 for every £2 earned (until it gets reduced to the basic allowance that everyone is entitled to).

Isn't it worth some people over 65 investing in premium bonds - depending on their circumstances? Winnings are tax free and don't affect the age allowance.

Reestit_Mutton

edda wrote: »

The statistics are too complicated for me to work out, but Martin's article is concerned only with 3 groups of people - non taxpayers, basic rate and higher taxpayers.

What about those aged over 65 or 75? They get an increased age allowance for tax purposes. This allowance is reduce by £1 for every £2 earned (until it gets reduced to the basic allowance that everyone is entitled to).

Isn't it worth some people over 65 investing in premium bonds - depending on their circumstances? Winnings are tax free and don't affect the age allowance.

Absolutely.

This is also a particularly useful vehicle for those who are approaching the higher rate tax band by virtue of having substantial savings earning interest and who wish to keep themselves clear of it. This can save some people an awful lot of work if it removes the burden of filling in an annual self-assessment tax return (which all higher rate earners with any savings interest are required to do).

HtH
Reestit Mutton

harryhound

Hi Edda,

Very good point. Martin take note!

However, please don't start a rumor as in my opinion the majority of senior citizens have failed to realise that they are the most hightly taxed people in the land. At least on a marginal basis.

The age allowance is an enhanced personal allowance, awarded to the old and again even more enhanced to the very old, to help them with those little extra costs (like travel insurance !) that come with being a member of the over the hill club. HOWEVER millionaires don't get it, at a certain level of income, it starts getting clawed back. If the senior citizen's income is in the claw back band each extra pound on the pension means the government claws back more than half of the increase.
So putting money into Premium Bonds can cut what counts as income at a stroke:D

I am only an apprentice senior citizen - qualify for the bus pass but not most of the benefits - perhaps from your experience, you could explain how it works in detail ?

Unfortunately as one gets older, money gets more complicated. The need to keep the old grey cells active in order to keep an eye on all the additional rules gets greater. My late Mum was a classic and liked to keep her financial cards close to her chest. She would ask for advice and then judge it on what she thought of the giver, as she kept on working into her 70's. When the 10% income tax band was introduced, I finally got her to agree to let me help her with a claim. She got back a 3 figure sum and thought it magic money.
This was the year she finally retired and I discovered her unique way of dealing with the Age Allowance trap: "Look young man, I'm an old pensioner with a part time job and a 750 pound (private) pension - I don't understand
these forms and have not got time to fill them in" and he let her keep her age allowance when my calculations suggested he should have started clawing it back!

Unfortunately she had a friend, who obviously thought that the now retired widow was richer than she really was and advised "Putting money into Premium Bonds" to avoid the trap that nolonger faced her. She told me she had switched all her (out of date) saving-certificates into premium bonds (but as I found out as her executor) - she had moved a chunk of building society money into premium bonds, thus cutting her income.
As she got older she fell more in love with her bonds: what a nightmare: they would pay out fairly regularly. She would take the giro down to the old folks centre to boast about it and guess who had to write to National Savings asking for it to be renewed when I discovered it had gone "stale" three months later ?

So there is a message here for all senior citizens; do you homework, do your brain gym, follow up on your attempts to reinvest anything and lastly please don't hide your certificates behind the gas meter - instal a safe, with an alternative key holder!

Harry.

mushhead

All this talk of odds in the billions is actually only correct if we were living in America.
In this country a billion is in fact 1,000,000,000,000 not 1,000,000,000 which is known as a thousand million. The Americanisation of our numeracy is just baffling!

Paul_Herring

mushhead wrote: »

All this talk of odds in the billions is actually only correct if we were living in America.
In this country a billion is in fact 1,000,000,000,000 not 1,000,000,000 which is known as a thousand million. The Americanisation of our numeracy is just baffling!

You may find http://www.askoxford.com/asktheexperts/faq/aboutwords/billion interesting reading, since the adjectives 'British' and 'American' with regard to the billion do not indicate who 'invented' them, since the French came up with both systems.

mushhead

Paul_Herring wrote: »

You may find http://www.askoxford.com/asktheexperts/faq/aboutwords/billion interesting reading, since the adjectives 'British' and 'American' with regard to the billion do not indicate who 'invented' them, since the French came up with both systems.

What an interesting site
Just spent the last couple of hours having a look through their extensive Q&A section however, being a mathmetician at heart, this is something that has always bugged me as i was brought up with the 'British' version and have never really understood why the change has been so widely accepted. Given that mathematics is basically a logical science, and that the British way of doing it seems the most logical, why the acceptance of something outside of that?

Lopo

my 2 pence worth -

Made a large purchase of bonds back in August 2006. Have since won nearly every month which currently adds up nicely as a 7% return on the invested sum.

Cant complain with that really. Have a few more months to go until I've held them for a year so that 7% figure should hopefully continue to increase until then!

Always something to look forward to !

Good Luck everyone !

Lopo

srvr

Hi all

My first time post here.

I have read the figures and i agree with the maths, i think i worked out something like i would win on average 1 prize every 12 months for every £1600 i invested although i forget how i worked that out. :T

So far i am above average in winnings but only just.

However this is'nt the reason for my post. My premium bonds are purely unearned income. By unerned income i mean such things as presents, lottery wins, the penny jar, the flutter on the Grand National or whatever your poison, a work lottery, other gifts, sold crud on ebay that made a few pounds like old dvd etc or even dropping the jackpot on the one armed bandit.

So basically none of my earnings from my wage or investment returns (in the classical sense) go to buying premium bonds as compared to say cash ISA's its not a good deal.

So basically the money i have not earned but come to posses and that i would not otherwise have had if not for circumstance gets dumped into Premium Bonds where it has the almost impossible chance of making me rich or at least on average growing at or above inflation. Ill keep adding to it whenever circumstance dictates but i WOULD NOT otherwise recomend them for most a effective means of saving.

My rational is that this extra few quid here and there would otherwise just get swallowed up and wasted otherwise and at least this way i have a fun way or keeping cash reserve with the chance of a big win hovering about.

Obviously what i consider unearned income is not what you may consider unearned income but thats a personal psychology thing and its fun.

Srvr

PS

This Premium Bond Cash Reserve that grows spasmodically is also my mortgage payment reserve. Its big enough now to fund three months of mortage payments which is another nice safety net if i ever need it which i hopefully wont.

PPS

I would personally recomend that purchasers of Premium Bonds dont tick the auto reinvest option if you win. Firstly it takes all the fun out of it and secondly it robs you of the satisfaction of buying more premium bonds with your winnings in person and thus adding more unearned income to your unearned income cash reserve.

Its not the cleverest thing to do but it is fun and if you share my psycology you will be able to see the advantage of the system in preserving some money that woudl otherwise get eaten up.

Of course you could do the same with a good savings account but its less fun and more likely to be spent and sorta lumps it with your other Earned money which sort of defeats the object imho.

Lopo

always auto-reinvest!! .....its the only way to go!

besides, you can cash it in later if you must!

Paul_Herring

mushhead wrote: »

What an interesting site
Just spent the last couple of hours having a look through their extensive Q&A section however, being a mathmetician at heart, this is something that has always bugged me as i was brought up with the 'British' version and have never really understood why the change has been so widely accepted. Given that mathematics is basically a logical science, and that the British way of doing it seems the most logical, why the acceptance of something outside of that?

I'll only mention a more controversial aspect of 'naming of units' - merely the defintion of a hard disk that is (for example) called '160GB' big. A 'thanks' will go to the person who correctly gives the correct number of bytes (i.e. 8 bits) that the drive has, given
(a) the definition by a store selling them
(b) a computer user used to the binary numbering system would expect such a drive to have.
(c) the result of (b)/(a) to 2dp
(d) The new 'units' proposed that the drive should mention to remove the confusion between (a) and (b) and would result in (c) being 100%. Assume that the 160 is to be retained (for those following, it should contain the number of bytes mentioned in (b))

On a more layman's terms, that 2GB pen you just bought out of Tesco's does not actually contain '2GBs' of free space.


With hindsight, this really needs to be on a different thread, if not a different site