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Premium Bonds Vs ISAs
mattk35
Posts: 55 Forumite
Afternoon all, I have 4k sat in premium bonds at the moment and haven't (foolishly) put anything into my ISA this year. Is it worth putting in 3K now? Thanks in advance. Matt.
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Yes :money: .............................'In nature, there are neither rewards nor punishments - there are Consequences.'0
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Absolutely 100%.
The expected return from Premium bonds (ie the arithmetic mean) is 4% tax free, while the best ISA is over 6% tax free. However, the Premium bond return is more of a Poisson distribution than a Normal one, so the likely returns are better shown by the median prize, which is well below the mean because of the really big prizes skewing the distribution. As such, you might well find that 3% or less is more like the usual per year for most investors.
I'd personally go with the ISA any day. Then I'd go with the stocks and shares portion. Then direct investment in unit trusts/OEICS/etc, then shares, then index-linked saving certificates, regular saving accounts, normal saving accounts, then maybe Premium Bonds if I had anything left over. Maybe...
I am a Chartered Financial Planner
Anything I say on the forum is for discussion purposes only and should not be construed as personal financial advice. It is vitally important to do your own research before acting on information gathered from any users on this forum.0 -
PB's are only worth considering if you are a high rate tax-payer and you have used up all your other tax-free options such as ISA's and index linked savings certificates.In case you hadn't already worked it out - the entire global financial system is predicated on the assumption that you're an idiot:cool:0
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Yes, If you don't use your ISA allowance this year you'll lose it.0
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Thanks everyone, I wasn't to sure if the amount of interest i'll be paid this year would be worth all the hassle of taking the money out of the PB's? Wasn't sure if the interest on the ISA is worked out by how long you have the money in the account? Soz for my ignorance
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£3k in an ISA is going to "win" at least £180 tax-free a year at the moment. If you have more than average luck, PBs could work out better, but for most people they'll work out worse.0
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Thanks everyone, I wasn't to sure if the amount of interest i'll be paid this year would be worth all the hassle of taking the money out of the PB's? Wasn't sure if the interest on the ISA is worked out by how long you have the money in the account? Soz for my ignorance
You have about 6 months left before the end of the tax year. At 6% tax free you'll be getting about £90 from it by April. Plus, this years allowance will disappear for ever in April 2008 - once that money is in there it can stay in there earning interest tax free until the treasury decides to axe ISAs.
Lil0
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