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What's effective interest rate on premium bonds?
DeepBreakfast
Posts: 3 Newbie
We have money in an assortment of savings accounts and are planning to put some of it towards a house renovation project. It includes ISAs for myself and my husband, his earning about 2% and mine 3%, and some premium bonds which his late mum saved up for him over many years, buying new ones on his birthdays and other special occasions, totalling about £17k. I know they don't really earn interest but we seem to get £25-£50 prizes every few months.
Should we cash in the premium bonds first or the lower-paying ISA? The premium bonds have some sentimental value but it seems silly to hold onto them if they are a poorer investment than the ISA.
Should we cash in the premium bonds first or the lower-paying ISA? The premium bonds have some sentimental value but it seems silly to hold onto them if they are a poorer investment than the ISA.
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Comments
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According to http://www.nsandi.com/savings-premium-bonds, it's currently 1.3% (tax free).0
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According to http://www.nsandi.com/savings-premium-bonds, it's currently 1.3% (tax free).
Because of the way the maths works out (with the monthly payout skewed in favour of the high-value 'prizes'), most people would expect to receive less than this - probably around 1.1%.
Probability says that you'll be better off by cashing in the premium bonds than the ISAs.0 -
you can do it in advance so they pay out just after a draw.0
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Because of the way the maths works out (with the monthly payout skewed in favour of the high-value 'prizes'), most people would expect to receive less than this - probably around 1.1%.
Probability says that you'll be better off by cashing in the premium bonds than the ISAs.
Yes, it's certainly not an interest rate in the generally accepted sense, in that some (a lucky few) will get a spectacularly higher return whereas many (most, on average, as you say) will get less, potentially even nothing at all!0 -
some (a lucky few) will get a spectacularly higher return whereas many (most, on average, as you say) will get less, potentially even nothing at all!
So, just like actively managed funds then?
I am not a financial adviser and neither do I play one on television. I might occasionally give bad advice but at least it's free.
Like all religions, the Faith of the Invisible Pink Unicorns is based upon both logic and faith. We have faith that they are pink; we logically know that they are invisible because we can't see them.0 -
gadgetmind wrote: »So, just like actively managed funds then?
Very good, but at least with premium bonds you retain the value of your original investment (albeit depleted by inflation)!0
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