Premium Bonds

SailorSam

Ifts wrote: »

I would have thought it would be easier to get closer to 3% if you had a little more than £30K, 2 x Santander 123 accounts with £40k (£20k in each) would be better than £20k in one and only £10k in the 2nd 123 account.

Don't Santander have a monthly charge for those accounts ?
Are they worth it ?

Ifts

SailorSam wrote: »

Don't Santander have a monthly charge for those accounts ?
Are they worth it ?

Yes they do have a £2 per month fee (although that can be returned if you have direct debits that qualify for cashback) thats why I said it would be better to have £20K in the second 123 account so you can benefit getting as close to the 3% as possible.

It is still worth having a 123 account with £20k in it even after paying the £2 per month fee, alright its not quite 3% but its very close and beats what else is out there (3% up to £20k & easy access).

If you have qualifying DD's going out of the account then I believe you can get a return better than the 3% thats advertised.

Archi_Bald

SailorSam wrote: »

Don't Santander have a monthly charge for those accounts ?
Are they worth it ?

Depends on your circumstances. Firstly, you'd need a balance of between £3 and £20K per 123 (you are allowed 2 of them these days). The monthly £2 charge still leaves the interest another account has to beat at 2.88% gross, ignoring any possible cashback from DDs. Cashback might push your AER quite a bit above 3% gross.

If you have maxed your Lloyds and BoS Vantages (3% AER on balances between £3K and £5K, max 3 of these accounts per person), one or two 123s should be irresistable. If you have DDs that will attract 123 cashback of more than £4 a month, then one or two 123 accounts will be plain unbeatable as far as 'instant access' savings are concerned. And even medium-term savings accounts.

I have 3 123s (from before the times when you were only allowed 2)

Stompa

utab007 wrote: »

...and there is always a chance I may get lucky with a big prize with premium bonds.

Don't count on it. The chances of a PB winning a high value (£1000+) prize is less than the chance of winning the jackpot on the National Lottery.

Momomo_2

All the comments here point to a few things: inflation, lottery ticket mentality etc.

It's key to be well-diversified. Is this 30k part of a broader portfolio already? If not then I would definitely not be tempted to put all of it in Premium Bonds. I had 2.5k in Premium Bonds for two years and won....0. So, I moved it out and it's sitting somewhere earning me a rate of interest that fluctuates (Stocks & Shares ISA) but is growing for sure. That's the risk with Premium Bonds - it may not grow at all. The growth will be unlikely to be anything when you take into account inflation at 2.8%.

cornburn

Stompa wrote: »

Don't count on it. The chances of a PB winning a high value (£1000+) prize is less than the chance of winning the jackpot on the National Lottery.

Is that true? I suppose if you put £30k on the lottery vs £30k on PB's you'd win more on the lottery, but then with the PB's you still have your £30k left!

Stompa

cornburn wrote: »

Is that true?

Last month there were 913 high value (£1000+) prizes, and £45bn worth of bonds in circulation. So the chances of a bond winning a high value prize in any month is 1 in 49,288,061.

2010

YOUR inflation rate may not be the same as the official rate.

http://www.bbc.co.uk/news/business-22523612

How is inflation calculated?
Every month the Office for National Statistics (ONS) collects more than 100,000 prices of goods and services from a wide range of retailers across the country - including online retailers.
Prices are updated every month and price collectors visit the same retailers each time in order to monitor identical goods and make sure they are comparing like with like.
All these prices are combined using information on average household spending patterns to produce an overall prices index.
It also takes into account how much we spend on different items.
So items are weighted - i.e. given more importance in the inflation indexes - according to how much we spend on them.
We typically spend more on fuel than on postage stamps, for example.
So a large rise in the price of petrol and diesel would affect the overall rate of inflation more, as it has a weight of 4% in the RPI.
Meanwhile a rise in the price of stamps is less likely to affect the overall index, as they have a weighting of 0.1%.

jimjames

Momomo wrote: »

So, I moved it out and it's sitting somewhere earning me a rate of interest that fluctuates (Stocks & Shares ISA) but is growing for sure. That's the risk with Premium Bonds - it may not grow at all. The growth will be unlikely to be anything when you take into account inflation at 2.8%.

I'm assuming you didn't really mean what you wrote as I hope you understand what you have bought with a S&S ISA.

Unless you hold bonds you do not get a rate of interest on a S&S ISA, you get dividends and you get (hopefully) capital growth. Neither are guaranteed but then nor is the rate of interest on a savings account.

Back to the original question - it really depends what you want to achieve and how this money fits into your overall plan. If you need easy access money with capital guaranteed then it may suit but if you are looking for long term income then you may be better looking at S&S based options which will give a higher income as well as the possible growth in your capital too.