Premium Bonds

no_money_sense

Hello,

I am shortly going to be debt free - (roll on the end of July) and with that I will have 500-700 pounds a month to save through various methods, one method I am particularly interested in is premium bonds.

I was hoping someone could give me a run down of how they work? It to me in its most basic sounds like a savings account that pays 1.30% and on top of that a raffle where you can win some money every month?

This seems like a tempting deal to me? I was thinking about investing £100 a month into premium bonds, is it worth it?

sorcerer

I think you misunderstood how it works, the 1.3% they quote is not what you get, but it's the average that people win. It is not a guarantee, you could get 0% or more than 1.3% its about luck. And most of the time you win it's most likely to be £25, I have £30,000 in and I have won about £250 in the last year, but I could have won £0 or £1,000,000, or anything in the middle.

CLAPTON

you receive NO interest
and the rest is just gambling with the cost being the interest you might have gained had you saved the money in a saving a/c.

JB9302

I had £400 in by April this year ( just started at £100 pm ) and won £25 in April from a March investment .
Its alternative to the lottery for me .

Archi_Bald

When they add a second £1m prize in August, the chances of a relatively acceptable return will go down even further since the total prize money pot won't be increased. So the second million will come at the expense of lots of those £25 wins.

With inflation running near 2%, putting money into anything that pays less than 2% net means that you can be 99.9% certain your money will be losing value in a PB account. Of course, you might want to take the 45 billion to 1 (or so) chance to win a million....

http://www.moneysavingexpert.com/savings/premium-bonds-calculator/

jimjames

JB9302 wrote: »

I had £400 in by April this year ( just started at £100 pm ) and won £25 in April from a March investment .
Its alternative to the lottery for me .

It is an alternative to the lottery but one where you keep your stake.

However that doesn't make it a good place to save or to build up an emergency pot.

If you have £1000 in TSB and Halifax you'll get £125 gross per year which is guaranteed. I'd rather go for that return than the possibility of £1m and with much easier access to the money if needed.

powertron

jimjames wrote: »

It is an alternative to the lottery but one where you keep your stake.

However that doesn't make it a good place to save or to build up an emergency pot.

If you have £1000 in TSB and Halifax you'll get £125 gross per year which is guaranteed. I'd rather go for that return than the possibility of £1m and with much easier access to the money if needed.

Which accounts are these? TSB and Halifax have really low interest rates.

FireWyrm

I stick money in them for the lottery value. You get to keep the stake and you might make a million. Worth it for a few hundred but not for thousands invested unless you want the cast iron government guarantee of it being a premium bond. Its a nice place to put the Xmas savings for instance.

bryanb

jimjames wrote: »

If you have £1000 in TSB and Halifax you'll get £125 gross per year which is guaranteed. I'd rather go for that return than the possibility of £1m and with much easier access to the money if needed.

I want one of those accounts!!! 12.5% Fantastic!!!

sorcerer

I use it to reduce my tax bill, I put money in a premium bonds, and when ISA seasons comes along I move it to my Stocks and Share ISA.

FireWyrm

bryanb wrote: »

I want one of those accounts!!! 12.5% Fantastic!!!

Think you missed the meaning but I agree an account paying 12.5% would be awesome.

If you have £1000 in TSB and Halifax you'll get £125 gross per year