Premium Bonds: Are they worth it? Discussion Area

Jonbvn

debbie42 wrote: »

My OH has around 10K in PBs, for around a year. My children have around 1K each, for around 6 months. In the past six months, my OH has won £50, and my children £300 between them. He's not a happy bunny, whereas my children think it's great.

This shows the fun side of PB's, which most other savings do not offer.

Thanks!:T

patrickbateman

I really cannot accept that ERNIE is truely a random number generator. The process must be fundamentally flawed.

For Example,
Some lucky chap from Nottm who has a holding of 10k has in June won 2 prizes of 5k each. There are 589 prizes of 5000 per month and this guy has won two of them, great for him and I wish him all the best, but the system must be corrupt.

Apparantly there are roughly 1.4million prizes per month, and a 24000:1 chance of winning a prize, which means the total investment is about 33.6Billion. This chap has got 2 prizes out of a possible 589/33,600,000,000

The odds of achieving this must be astronomical!!!

Paul_Herring

Patrick wrote:

The odds of achieving this must be astronomical!!!

Exactly the same as the odds of two particular people getting the prizes.

baby_boomer

Are Premium Bonds worth it? Of course not.

If you've not got enough money then you need the interest which you can get tax free in a 6% ISA.

If you've got enough money then still max out your ISA.

If you've got more than enough money then it probably doesn't matter.

I'd personally only consider them if I was a higher rate taxpayer with my retirement savings already sorted, with my ISAs maxed out and if I already had a significant part of my portfolio in the stock market.

mrsS_2

I have £11000 in bonds (£8000 bought in January) and have won £550 in total since January-I didnt really win much before this. Is this any good? I cant do the calculations sorry!

bobbyron

my wife and i have had the maximum 30k each for 36 months.
year 1 won = £1750.
year 2 won = £1250.
year 3 won = £1900.
total = £4900.

Paul_Herring

bobbyron wrote: »

my wife and i have had the maximum 30k each for 36 months.
year 1 won = £1750.
year 2 won = £1250.
year 3 won = £1900.
total = £4900.

By my (simplistic) calculations (4,900/60,000 / (36/12) ) = 2.7% PA - well below an 'average' savings account.

I'd stick with a NaffWest savings account

harryhound

baby_boomer wrote: »

Are Premium Bonds worth it? Of course not.

If you've not got enough money then you need the interest which you can get tax free in a 6% ISA.

If you've got enough money then still max out your ISA.

If you've got more than enough money then it probably doesn't matter.

I'd personally only consider them if I was a higher rate taxpayer with my retirement savings already sorted, with my ISAs maxed out and if I already had a significant part of my portfolio in the stock market.

Modestly comfortable pensioners should be aware of their additional personal allowance, called Age Allowance. This gets clawed back at a rate of 1 GBP for every 2 extra GBP's of income. If they find themselves in the claw back zone every extra pound of (say) a pension increase is taxed at 22% + 11% = 33%. Some National Savings products don't count as generating "income" and can be used to avoid the Government getting 33p of every extra pound. Do the sums ! This site might help:

http://www.arch-fp.co.uk/investments_and_age_allowance.php

Harry.

PS Make sure you have been getting your 10% tax band too, you can reopen the calculations back to the January that comes before the the tax year end of 5th April. (ie in commerce there is a 6 year rule but the tax man only allows 5 3/4 years a law unto himself !). When my poor old mum died, she had been in no fit condition to sign let alone calculate a tax return for 4 years; as her executor I was able to claim back over four hundred pounds for each of these years.

baby_boomer

It's crazy that Life Assurance Bonds are also exempt as the annual "income" taken from them is counted as capital.

But I think you have to set these up well in advance of retirement. To set them up in retirement with the clear intention of reducing tax may not work, although the website you quote doesn't mention this.

The message to future pensioners like me should be to use ISAs NOW in order to avoid being placed in such an artificial and invidious position.

harryhound

baby_boomer wrote: »

It's crazy that Life Assurance Bonds are also exempt as the annual "income" taken from them is counted as capital.

But I think you have to set these up well in advance of retirement. To set them up in retirement with the clear intention of reducing tax may not work, although the website you quote doesn't mention this.

The message to future pensioners like me should be to use ISAs NOW in order to avoid being placed in such an artificial and invidious position.

We must not get too far off thread BUT the 5% taken out of an investment does not even qualify for Capital Gains Tax as it is considered minimal compared with the total capital value of the investment.

I suggested to my old mum that she bought a zero income investment trust (not one of the sort of that got involved in the scandal with "Aberdeen" written on it) and sell 10 percent a year to soak up her CGT allowance - she started getting a bit twitchy as the market slumped after 9/11 but she still had 80% of her investment in pound terms when she died.