ISAs' PSA and prerium bonds

qa1

Hi

I've a cash isa with 10 of 000s of £ in it paying a miserable .6%

Is an ISA defunct now that the PSA exists?

Do I:
1 - move it to another cash isa paying 1.1
2 - put it in premium bonds (50k max) and get, according to m lewis's premium bond calculator get an "average" of £500 a year and a chance to get a million and have the security of never losing money.

thanks

HappyHarry

qa1 wrote: »

Hi

I've a cash isa with 10 of 000s of £ in it paying a miserable .6%

Is an ISA defunct now that the PSA exists?

Do I:
1 - move it to another cash isa paying 1.1
2 - put it in premium bonds (50k max) and get, according to m lewis's premium bond calculator get an "average" of £500 a year and a chance to get a million and have the security of never losing money.

thanks

Is the [cash] ISA defunct? No, but it is now far less useful than it used to be for the majority of people. If you don't have a PSA, or exceed your PSA, then cash in an ISA is useful.

However, there are many accounts out there paying higher than ISA rates. Have a look on the main MSE site.

To answer your questions:

1. It would be better than a cash ISA paying 0.6%
2. An average of 1% is better than 0.6%. You would have the security of never losing money in almost any cash deposit account (providing you check the FSCS protection limits). The chance of winning £1m is pretty small.

With inflation currently at 1.6%, it seems inevitable that your cash deposits will lose their value over time.

There are many other options available, including investing in an almost infinite variety of ways.

robotrobo

qa1 wrote: »

Hi

I've a cash isa with 10 of 000s of £ in it paying a miserable .6%

Is an ISA defunct now that the PSA exists?

Do I:
1 - move it to another cash isa paying 1.1
2 - put it in premium bonds (50k max) and get, according to m lewis's premium bond calculator get an "average" of £500 a year and a chance to get a million and have the security of never losing money.

thanks

well like your thinking!, i cashed in some isas & purchased 50k in premium bonds.
But i already got quite a few accounts ,
4 x 123 accounts , 2 each
tsb.
lloyds
first direct
regular savers.

whats the worst that can happen?, if interest rates go up, you can cash them in and put it back in isas, for that current year.

I also have premium bonds other than 50k , & we do win occasionally, most being £100 , in june this year , i have a isa maturing & that also is going into p/bonds , makeing 100k for two of us.:)

qa1

Presumably if you pull all money out the ISA after then putting into P Bonds I am not allowed to put that money back in to the ISA pot I have?

For me it seems a no brainer with the P Bonds - money is safe, its not gambling as your stake is always safe and you may become a millionaire which has far better odds than the lottery AND its likely with 50k of P bonds you win £500 on average a year! Am I missing something?

robotrobo wrote: »

well like your thinking!, i cashed in some isas & purchased 50k in premium bonds.
But i already got quite a few accounts ,
4 x 123 accounts , 2 each
tsb.
lloyds
first direct
regular savers.

whats the worst that can happen?, if interest rates go up, you can cash them in and put it back in isas, for that current year.

I also have premium bonds other than 50k , & we do win occasionally, most being £100 , in june this year , i have a isa maturing & that also is going into p/bonds , makeing 100k for two of us.:)

bowlhead99

qa1 wrote: »

For me it seems a no brainer with the P Bonds - money is safe, its not gambling as your stake is always safe and you may become a millionaire which has far better odds than the lottery AND its likely with 50k of P bonds you win £500 on average a year! Am I missing something?

You are gambling the interest income.

You may get the £500 a year or you may not.

The odds of getting a million pounds prize are incredibly small. On average it would take over thirty billion months to win it, per pound invested, if you have average luck and they don't reduce the rates in that time period. If you have worse than average luck, or they reduce the rate, it would take longer. Meanwhile the 1% return is only half the likely rate of inflation for the next year so you are losing money in real terms every month.

The lottery pays larger prizes. If you play the lottery on a couple of rollover weeks during the course of the year you can get yourself a similarly-incredibly-unlikely chance of winning a life-changing amount of money (a larger amount of money, too).

If you are a high rate taxpayer who has completely maxed out all the decent bank accounts but does not actually want to invest the rest of their money for long term growthbecause they need it back in the short or medium term, then *maybe* PBs would be worth looking at.

If you don't need the money any time soon, I see from other posts on the forum that new bank Atom is offering 2% on a one year fix, which is twice what PBs could be expected to pay.

qa1

the "average" odds of getting a million is 1 in 53000 if you hold £50000. That does not seem that small to me.

bowlhead99 wrote: »

You are gambling the interest income.

You may get the £500 a year or you may not.

The odds of getting a million pounds prize are incredibly small. On average it would take over thirty billion months to win it, per pound invested, if you have average luck and they don't reduce the rates in that time period. If you have worse than average luck, or they reduce the rate, it would take longer. Meanwhile the 1% return is only half the likely rate of inflation for the next year so you are losing money in real terms every month.

The lottery pays larger prizes. If you play the lottery on a couple of rollover weeks during the course of the year you can get yourself a similarly-incredibly-unlikely chance of winning a life-changing amount of money (a larger amount of money, too).

If you are a high rate taxpayer who has completely maxed out all the decent bank accounts but does not actually want to invest the rest of their money for long term growthbecause they need it back in the short or medium term, then *maybe* PBs would be worth looking at.

If you don't need the money any time soon, I see from other posts on the forum that new bank Atom is offering 2% on a one year fix, which is twice what PBs could be expected to pay.

qa1

On Martin's calculator its very interesting, thats an 87% chance you'll win more than that.

If you out £50K :-

Put the money in the top savings account paying 1.05% and you'd earn £420.00 (assuming monthly-paid interest).

How do Premium Bonds compare?

With the same amount in Premium Bonds, there's a 13.1% chance you'll earn less than this.

As the blue stickmen show if you lined up 10 people with this amount of bonds, only those in yellow would beat the top savings.

bowlhead99 wrote: »

You are gambling the interest income.

You may get the £500 a year or you may not.

The odds of getting a million pounds prize are incredibly small. On average it would take over thirty billion months to win it, per pound invested, if you have average luck and they don't reduce the rates in that time period. If you have worse than average luck, or they reduce the rate, it would take longer. Meanwhile the 1% return is only half the likely rate of inflation for the next year so you are losing money in real terms every month.

The lottery pays larger prizes. If you play the lottery on a couple of rollover weeks during the course of the year you can get yourself a similarly-incredibly-unlikely chance of winning a life-changing amount of money (a larger amount of money, too).

If you are a high rate taxpayer who has completely maxed out all the decent bank accounts but does not actually want to invest the rest of their money for long term growthbecause they need it back in the short or medium term, then *maybe* PBs would be worth looking at.

If you don't need the money any time soon, I see from other posts on the forum that new bank Atom is offering 2% on a one year fix, which is twice what PBs could be expected to pay.