Advised to put £10k into premium bonds, am I right to disagree?

kidmugsy

MrsCautious wrote: »

... with an £84k mortgage to pay off in 12 years' time. (Currently paying interest only at 0.87 interest only, set at .3 above base rate.)

I'd be looking at accounts that pay a guaranteed differential above base rates. Cambridge BS has offered some attractive ISAs recently on that principle. Worth keeping an eye on their site?
http://www.cambridgebs.co.uk/savings/

Alias_Omega

March will see the increase in ISA's, then they will fly flat May onwards.

Have you looked at the money-facts website? It can be found from google.

ellies_angel

my inlaws both have the max saved in premium bonds each and they have a win each month, sometimes, hers, his or both. He is an ex bank manager! They will have money invested elsewhere but for them thats £60,000 tax free saving which can be withdrawn relatively quickly with no risk.
Another friend of mine invested the £25,000 she had taken out for a loan on an extension. The extension was delayed by around 6 months so she put it in premium bonds. She had a couple of £50 wins and then a big one £25,000.

opinions4u

He is an ex bank manager

There's a lot of it about.

But that doesn't make PBs a good savings plan.

HappyMJ

ellies_angel wrote: »

my inlaws both have the max saved in premium bonds each and they have a win each month, sometimes, hers, his or both. He is an ex bank manager! They will have money invested elsewhere but for them thats £60,000 tax free saving which can be withdrawn relatively quickly with no risk.
Another friend of mine invested the £25,000 she had taken out for a loan on an extension. The extension was delayed by around 6 months so she put it in premium bonds. She had a couple of £50 wins and then a big one £25,000.

Thousands of people win good prizes on the lottery each week too...it doesn't make it a good investment. If they invested the full £60,000 into savings accounts then they would be earning after tax at 2.4%...almost £28 each week which could then be used to buy lottery tickets. It's almost guaranteed that they will win something (£10) every month and a big prize of about £5,000 (excluding jackpot) is also almost guaranteed every 10 years.....but that's £14,560 spent on lottery tickets.

Tax free saving doesn't also make it a good investment.

innovate

kidmugsy wrote: »

I'd be looking at accounts that pay a guaranteed differential above base rates. Cambridge BS has offered some attractive ISAs recently on that principle. Worth keeping an eye on their site?
http://www.cambridgebs.co.uk/savings/

Sadly, a "...guaranteed x% above base rate..." account is no guarantee whatsoever that you get the best deal for yourself. Many ISA providers guarantee something, but most of them don't guarantee anything for much longer than 12 - 18 months. Except if you go for a fixed-rate, fixed-term deal - these have a guaranteed rate by definition, and some of those are available for up to 5 years, which may or may not be something you'd want to do (not least because you may only be able to make one single deposit only, and early withdrawals carry hefty penalties).

I can't recall having seen Cambridge BS listed on Kazza's best cash ISA list, which is pretty much the best collection of best ISAs because it's kept up-to-date with input from many MSEers. For a summary, see first post in this thread https://forums.moneysavingexpert.com/discussion/401374

innovate

ellies_angel wrote: »

my inlaws both have the max saved in premium bonds each and they have a win each month, sometimes, hers, his or both. He is an ex bank manager! They will have money invested elsewhere but for them thats £60,000 tax free saving which can be withdrawn relatively quickly with no risk.

As an ex-bank manager, your FIL will understand (whether he admits it or not) that there is not "no risk", but a very significant risk in keeping cash.

That risk is inflation -- - which has been running a lot higher than literally all available savings interest rates for a few months now. PB "wins" (which are nothing more than interest on the deposit) have been running way below inflation for years.

Barring some very significant "wins", it would not be surprising if your inlaws were actually steadily losing money in their PB accounts.

There are lots of inflation calculators on the web if you want to see an illustration of the inflationary effects. E.g.

• For historic inflation: http://www.hl.co.uk/news/inflation-calculator
• For future inflation: http://www.hl.co.uk/news/future-inflation-calculator

bryanb

UsernameAlreadyExists wrote: »

and on the flip side, even having only £100 PBs entitles you to the chance of winning a million. (yes, unlikely I know!)

Actually one hundred chances!

HappyMJ

bryanb wrote: »

Actually one hundred chances!

At 42,500,000,000 to one. 24,000 to one of winning any prize and 96% of those prizes are £25. http://www.nsandi.com/savings-current-interest-rates-premium-bonds-prize-draw-details

opinions4u

innovate wrote: »

Sadly, a "...guaranteed x% above base rate..." account is no guarantee whatsoever that you get the best deal for yourself. Many ISA providers guarantee something, but most of them don't guarantee anything for much longer than 12 - 18 months. Except if you go for a fixed-rate, fixed-term deal - these have a guaranteed rate by definition, and some of those are available for up to 5 years, which may or may not be something you'd want to do (not least because you may only be able to make one single deposit only, and early withdrawals carry hefty penalties).

I can't recall having seen Cambridge BS listed on Kazza's best cash ISA list, which is pretty much the best collection of best ISAs because it's kept up-to-date with input from many MSEers. For a summary, see first post in this thread https://forums.moneysavingexpert.com/discussion/401374

The main reason for nudging the OP towards tracker type savings accounts is that they can give an absolute guarantee (for a period of time) over and above the mortgage rate being charged.