R Premium bonds now worth a go?

D1zzy

With interest rates crashing are premium bonds now a better bet. I've had 12k for years and Average £300 (2.5%) pa-which now appears to be better than I can get anywhere else. Still waiting for a biggy tho. Seems now might be the time to up my stake

Stubod

Yes....and no.....statistics are great....they can predict that somebody will...but not who that somebody is....it may be you..then it may not be....make my day

dunstonh

Would you take the interest from a savings account and buy lottery tickets with the interest? If yes, then premium bonds are for you. It not then they are not (unless you have used up all other options first and are a higher rate taxpayer.

D1zzy

dunstonh wrote: »

Would you take the interest from a savings account and buy lottery tickets with the interest? If yes, then premium bonds are for you. It not then they are not (unless you have used up all other options first and are a higher rate taxpayer.

Well I might since over the last few years I've had 2.5% tax free - rubbish when savings accounts were paying 6% plus, but now as instant access rates are plummeting by the day and the best I can find is 2.4% gross - I think topping up o 30k is probably worth a punt .

sorcerer

i was actually thinking the same thing, i have an account ending in May next year, so can't do anything until then, but if it's rates don't improve or stay the same, I think it might be worth me topping it up to the 30,000 at least until rates improve.

somethingcorporate

I have about £20k in current year savings, the worst of it is 3.5% gross - the best in an 8% regular saver.

Are rates really that poor at the moment?

I'd still steer well clear of premium bonds and hold out for NS&I and invest it via S&S Isas.

rb10

D1zzy wrote: »

Well I might since over the last few years I've had 2.5% tax free - rubbish when savings accounts were paying 6% plus, but now as instant access rates are plummeting by the day and the best I can find is 2.4% gross - I think topping up o 30k is probably worth a punt .

You have been very lucky to get 2.5% on them.

The expected return from premium bonds is currently c. 1.3%, so still some way below the best instant access savings.

opinions4u

D1zzy wrote: »

Well I might since over the last few years I've had 2.5% tax free - rubbish when savings accounts were paying 6% plus, but now as instant access rates are plummeting by the day and the best I can find is 2.4% gross - I think topping up o 30k is probably worth a punt .

Don't look at what you have won.

Look at what you are, statistically, likely to win.

The prize fund is 1.5%. That reduces to 1.3% if you strip out £1m prizes.

Your first deposit also misses the first draw, so effectively NIL interest for a period of time.

They are, however, tax free.

So would you put the first £5,640 of your cash in to an ISA paying 1.50%? I wouldn't.

Beyond that, a 20% taxpayer could compare a 1.88% easy access account to Premium Bonds. A 40% taxpayer gets a gross value of 2.50% and a 50% taxpayer is looking at 3.00% (dropping to 2.75% in April when top income tax falls to 45%).

If you do go for PBs there is a strong case for withdrawing enough to top up your cash ISA each April.

The lottery ticket analogy is a good one.. Would you take all your interest from a savings account and buy lottery tickets with it? If the answer is yes, and the net rate on your savings is less than 1.50%, then PBs make sense.

If the answer is no, or your net rate is greater than 1.50%, there is no logical reason whatsoever to get involved with PBs. Especially for basic rate taxpayers and non-taxpayers.

D1zzy

Just too logical ops4u. Have got various fixes maturing and need to keep em instant access for now ( kids u know). Every time I look at instant access accs the rates have fallen again and once they are around 2% after tax hardly seems worth the effort and so far over the last 10 yrs I've never had less then 2.5% from PBS ( also never had a big win)- and it's not the same as a lottery ticket since I get to hang on to the money. Anyway i still reckon with interest rates this low and falling, for the first time in a long time PBs r worth considering.

sabretoothtigger

Its for higher rate people, ironically Joe Bloggs should be holding ftse instead as it'll pay far better over time. If you do accumulation or hold in an ISA its going to avoid tax just like premium would

Or if it must be bonds get the RPI linked ones instead

Effectively your money has shrunk, so it's a LOSINGS, not savings account.

:money:

dunstonh

and it's not the same as a lottery ticket since I get to hang on to the money.

It is the same as a lottery in the context written in the posts. You are gambling the interest and you dont get your interest stake back if you dont win.