Thought I was doing the right thing with my money

misty6

Hello Savers

I've been reading though a few of the threads on this board and have come to realise that my savings don't seem to be in the best places according to the general advice given on here.

I have just over £30,000 in premium bonds and about £9,000 in a cash ISA. To my shame I can't even say how much interest the ISA generates but I do know it's dropped to not very much at all this last year.

I know I need to move the ISA cash but have been reluctant to move the PB cash in case I have a big win!!

I was just wondering what other people would do in my situation.

A bit about me if that helps. I am single, 50 and retired on ill health last year, taking home a Local Government pension of just over £1000 per month on which I can manage for the day to day stuff. The savings are for if I need a new car, boiler, roof etc. I am mortgage and debt free.

I really would appreciate any advice. Thanks

Eco_Miser

From next April you will be able to have about £3000 savings interest tax free:
£10.6k personal allowance + £5k savings income zero-rated band - £12.6k pension, so putting your money into high-interest current accounts will be way better than cash ISAs. See Top Savings Accounts near the top of the page for details (BOS also have a 3% account 3 x £5k).

Keep a few PBs for the chance to win big, and put the rest where it will earn most.

AlwaysLearnin

Ditto on the current accounts.

This may explain the tax free interest a bit more:

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/293747/Fact_sheet_template_-_10__tax_9.pdf

brasso

If you want nothing but preservation of capital, then cash accounts with the least bad interest rates will at least keep up with inflation,.

If it were me I would have the whole lot in a stocks and shares ISA and, with 39k, have around 6 or 7 investments -- a mix of Vanguard trackers and well regarded funds from the likes of Woodford.

Edited: I should add that my option would pose some theoretical risk to some of your capital, but IMO, at age 50, with no immediate need for all of the money, it's not a risk worth worrying about i.e. even if there was a dip in the markets next year, you have plenty of time to recover.

ColdIron

I would find a better home than PBs. You may win big but you probably won't. Returns are rock bottom and as you are barely a tax payer you don't even benefit from that small saving

JohnRo

OP, have you worked out what rate of return you're currently getting from your £30K premium bonds?

One suggestion often made is to move the PB money into an account earning interest and use some of that to then purchase a lottery ticket each week if you must have that big win thrill, £20K in a Santander 123 account @ 3% gross will be returning £40 a month after BRT. other accounts like TSB classic plus @5% are capped at £2K but even they will return approx. [STRIKE]£13[/STRIKE] £6.50 a month.

(edit: I have two TSB accounts so doubled up the return in error..)

atush

brasso wrote: »

If you want nothing but preservation of capital, then cash accounts with the least bad interest rates will at least keep up with inflation,.

If it were me I would have the whole lot in a stocks and shares ISA and, with 39k, have around 6 or 7 investments -- a mix of Vanguard trackers and well regarded funds from the likes of Woodford.

Edited: I should add that my option would pose some theoretical risk to some of your capital, but IMO, at age 50, with no immediate need for all of the money, it's not a risk worth worrying about i.e. even if there was a dip in the markets next year, you have plenty of time to recover.

While I agree in general that a S&S isa for some of the PB money could be in order, i'd never say for someone to put 100% of thei cash savings in one. For a start, should they need money they could be forced to sell at a loss.

So i'd say put 15K into a S&S isa to provide income above inflation with a chance of capital growth (reinvesting the dividends if the income is not required), and put the rest into Current accts. That way, less than half of your savings carry a risk, which means you can leave it to grow for ages without too much worry during periods of drops as you are reinvesting your divs and dont have to sell.

brasso

atush wrote: »

While I agree in general that a S&S isa for some of the PB money could be in order, i'd never say for someone to put 100% of thei cash savings in one. For a start, should they need money they could be forced to sell at a loss.

So i'd say put 15K into a S&S isa to provide income above inflation with a chance of capital growth (reinvesting the dividends if the income is not required), and put the rest into Current accts. That way, less than half of your savings carry a risk, which means you can leave it to grow for ages without too much worry during periods of drops as you are reinvesting your divs and dont have to sell.

Absolutely fair points, but I did preface what I said with "If it were me I would have the whole lot in a stocks and shares ISA...". It all comes down to risk tolerance. I'm now at the age when I'm no longer keen to take too much risk which is why I've been gradually moving all my investments away from individual stocks and into passive-ish funds i.e. things I can leave without worrying too much like low-cost Vanguard trackers and a small number of (what appear to be) pretty solid actively managed funds like Woodford's and Fundsmith etc.

I fully accept that even these choices would be deemed too high risk for some, but as always when assessing risk one tries to balance the perceived likelihood of a drop with the perceived likelihood of achieving returns above savings interest rates. And those cogitations must take place within the context of one's age and likelihood of needing a big chunk of the cash etc. If we weren't suffering from such chronically low savings rates, I'd have a different attitude but with nothing more tempting than the promise that my savings will keep up with inflation, I'm forced to look at the alternatives.

As you rightly say, there is a halfway house involving a mixture of cash and investment, and to be honest that is the position I take myself, even though the lion's share is invested. I make sure I do have enough cash available to deal with the odd unexpected expense.

dunstonh

I have just over £30,000 in premium bonds and about £9,000 in a cash ISA. To my shame I can't even say how much interest the ISA generates but I do know it's dropped to not very much at all this last year.

Would you put £30,000 in a savings account and take all the interest it generates and buy lottery tickets with that interest?

DaveTheMus

Can you still contribute to your pension....I think the Government will match a certain amount, so if you invest £3000 into a SIPP then the Government will stick in £600...20% is a much better yield than the ISA's

saver861

dunstonh wrote: »

Would you put £30,000 in a savings account and take all the interest it generates and buy lottery tickets with that interest?

Not sure the PB's are that negative! If I were the OP I'd be inclined to max out the high paying current accounts - Santander 3% on £20k - LLoyds 4% on £5k - Nationwide 5% on £2.5k.

Presumably OP must have a pension in region of £13k to take home just over £1,000 per month. Thus has about £2.6k to play with to get to the max £15,600 savings interest and income ceiling from April.

I find Premium Bonds do average out in the region of 1.2 to 1.3%. If I can keep that sort of return then its as good or better than many of the options available and all without any tie in time. Not banking on a big win as such but an occasional £500 among the smaller prizes would make that year a good return year.