Withdrawing Premium Bonds.. Options

mcc86

Afternoon,

After having Premium Bonds for a number of years, the first few which I was lucky enough to win more than what I would have done in interest, my luck has run out over the past couple of years.

I'm currently saving towards a deposit, but want to re-invest wisely to maximise my savings.

I was going to invest in the Help To Buy ISA at Halifax, however this is capped at £1,200 plus £200 a month. I was going to then open a Santander Current Savers Account (3% for up to £20,000), however my understanding is I can not do so in the same tax year. Have I understood this correctly?

Any advice on how best to invest, taking into account that I would not want it locked up for the next 2-5 years, is much appreciated.

Thank you,

YorkshireBoy

The Santander account is a current account, not an ISA, so there's no conflict with the HTB ISA.

You don't say how much cash you have, but the Santander account should almost certainly be bottom of your list, after you've exhausted the other 3/4/5% current accounts (which will take some £30K between them).

Check out the "best bank accounts" article on the main site.

Out of interest, when do you propose to buy?

mcc86

Thanks for that - I was assuming the Santander account was the best, based on the 'Best Bank Accounts - Interest' page.

I saw there are a couple of other options with 4-5%, but it seems quite restricted e.g. TSB requires you to have £4-5k.

Am I missing something?

I'm hoping to be in a position to buy in early 2017 - hence I wouldn't want the money tied into anywhere long term.

jimjames

mcc86 wrote: »

Thanks for that - I was assuming the Santander account was the best, based on the 'Best Bank Accounts - Interest' page.

I saw there are a couple of other options with 4-5%, but it seems quite restricted e.g. TSB requires you to have £4-5k.
.

Not sure which account you're looking at but I'm not aware of a TSB account that requires that, mine certainly doesn't.

How much do you have? If it's under £4k then a Santander123 is definitely a bad idea as the fees will hit interest payments far more.

Eco_Miser

mcc86 wrote: »

Thanks for that - I was assuming the Santander account was the best, based on the 'Best Bank Accounts - Interest' page.

It gets that position because you can save four times as much as in the next accounts. However, for most people, a selection of the higher paying accounts is better.

mcc86 wrote: »

I saw there are a couple of other options with 4-5%, but it seems quite restricted e.g. TSB requires you to have £4-5k.

Am I missing something?

Well, you seem to have missed that Lloyds TSB has split. It's Lloyds Club that only pays its best rate on £4-5k. If you have less than £4k, you still get interest, but at a lower rate. TSB is even more restrictive, only the first £2k gets any interest at all - but it is ten times base rate.

mcc86 wrote: »

I'm hoping to be in a position to buy in early 2017 - hence I wouldn't want the money tied into anywhere long term.

https://forums.moneysavingexpert.com/discussion/5374614 has a summary of all the current and regular saver with a worthwhile rate.

saver861

mcc86 wrote: »

Any advice on how best to invest, taking into account that I would not want it locked up for the next 2-5 years, is much appreciated.

Thank you,

Well, if you are putting into high interest accounts you are not effectively 'investing' rather than saving it. You don't say how much you have but as the maximum you can have in Premium Bonds is £50k it must be that or lower.

If you have a partner then you can create 3 Santander accounts (2 single and one joint ) and stash it at 3% minus charges, and tax on interest over £1000 from April. If split between you and partner then you have £2000 to play with before tax.

The higher the interest the lower the amount you will be able to save hence TSB 5% but max £2000. LLoyds is the next best bet after Santander at 4% up to £5k if I remember correctly.

It is about the best way to get around 3-4% on your money with immediate access and virtually no risk. The Premium Bonds should be coming in around 1.3% or so for average luck - both myself and the missus are averaging around 1.2% on our Premium Bonds.

So, effectively, the difference is going to be your 3% ish in the high interest accounts or your average 1.3% in PB's. Net gain less than 2% and any tax due.

So, either option is not going to make mega difference to your finances.

colsten

saver861 wrote: »

So, either option is not going to make mega difference to your finances.

There are hundreds of pounds of difference between keeping your money in Premium Bonds and exploiting the best current accounts and the best regular/monthly savings accounts. There is some work involved but the hourly rate is fantastic. I can't see why any prospective first time buyer would want to turn down the opportunity.

saver861 wrote: »

LLoyds is the next best bet after Santander at 4% up to £5k if I remember correctly.

your definition of "best" is the amount on which a single account pays interest. My definition of "best" is the account that pays the highest interest rate. There are current accounts which pay better interest than Santander on £30,000, plus there are the 6/5/4% regular/monthly saver accounts that can be fed with some £17,000 over a year. The Santander 123 is, in my books, almost the worst of all interest paying accounts as there are only two that pay a worse rate.

Repeating the link Eco Miser already posted: https://forums.moneysavingexpert.com/discussion/5374614

saver861

colsten wrote: »

There are hundreds of pounds of difference between keeping your money in Premium Bonds and exploiting the best current accounts and the best regular/monthly savings accounts. There is some work involved but the hourly rate is fantastic. I can't see why any prospective first time buyer would want to turn down the opportunity.

I don't disagree with you. The OP has not stated how much money he has in PB's so it is speculation to some degree. Clearly the less the amount is the less benefits there are. I guessed a figure of maximum £50,000 as being the limit that can be held in bonds.

As the OP said it was only for one year or so until the house purchase, the overall benefits will be limited and wont make considerable difference. If he goes down the route of maxing the higher interest lower ceiling accounts then he would get maximum benefit, but there would be a deal of account opening etc etc.

If he his pursuing a mortgage, then he needs to be careful of his credit history. So there are two aspects, one being the amount of work involved to get all the accounts open etc and not impacting credit rating. Clearly, the hourly rate for the benefit will be high, none the less it is hassle for some opening multiple accounts etc.

colsten wrote: »

your definition of "best" is the amount on which a single account pays interest. My definition of "best" is the account that pays the highest interest rate. There are current accounts which pay better interest than Santander on £30,000,

As above, I was thinking in terms of simplicity and credit rating versus the advantages of whichever route he takes given that it is just for one year max.

I don't know which accounts you are referring to but off the top of my head I have:
Nationwide 5% up to £2500 (for a year)
TSB 5% up to £2000
Lloyds 4% up to £5,000

The above maxed for two single and a joint account would be almost £30,000.

There are a few others at 3% without the Santander charges.

colsten

saver861 wrote: »

If he his pursuing a mortgage, then he needs to be careful of his credit history.

any current accounts applied for now will have literally no impact on a mortgage application in 6-12 months time. It is also easy to explain (and prove with bank statements) to a mortgage broker that you were opening the accounts in order to get better interest for your savings, not in order to increase your access to credit, as you would do with credit cards.

saver861 wrote: »

the overall benefits will be limited and wont make considerable difference.

I beg to disagree, as there are hundreds just alone in switching bonuses to be had. You don't even need a lot of money in order to do that.

saver861 wrote: »

There are a few others at 3% without the Santander charges.

You can put £21,000 alone into 3% accounts that have nil charges.

saver861 wrote: »

I don't know which accounts you are referring to but off the top of my head I have

The link to the best accounts has now been posted twice in this thread. No need to guess as it's all written down.

DiggerUK

Have you looked in to regular savings a/c's. Some pay up to 6%.

You have to empty them at the end of the saving period, but you could just put them back in to PB's, and cash in again to invest in new regular savers..._

colsten

DiggerUK wrote: »

Have you looked in to regular savings a/c's. Some pay up to 6%.

You have to empty them at the end of the saving period, but you could just put them back in to PB's, and cash in again to invest in new regular savers..._

RSs are on the list in the link posted twice in this thread. You can indeed feed them from PBs but you are most likely making more money if you feed them from interest-paying current accounts. All the good RSs pre-req current accounts anyway, although some of these pre-reqs pay 0% interest and are not a good place for keeping any money in for any length of time.