£300,000 how best to increase in a year but be safe

Mike_FS

AnotherJoe wrote: »

Its guaranteed you will get it back (by selling) at a value probably of around £49k compared to what it was originally. Plus any prizes you may win. On average £500.

I thought you can sell premium bonds back to NS&I at face value so you get £50K back don't you?

Plus expect to win an average of two £25 prizes per month after the first month (with a chance of something bigger).

bowlhead99

Mike_FS wrote: »

I thought you can sell premium bonds back to NS&I at face value so you get £50K back don't you?

Plus expect to win an average of two £25 prizes per month after the first month (with a chance of something bigger).

You're right of course that you do get back the full £50k you invested, but his perhaps cryptic response is recognising that your £50k is worth less than that in today's terms, because the prices of an average basket of goods and services will have gone up by 2% or more in the meantime.

So the £50k you cash in will not buy as much as it buys today- as he says: "value probably of around £49k compared to what it was originally". The prizes (which will, more likely than not, be less than the headline rate of 1.4%) will go some way to making up the loss in purchasing power.

As the income from them is tax free, they can be useful for someone who has lots of interest income and has used up their 0% 'personal savings allowance", especially if you are a higher rate tax payer where saving tax on interest income is valuable.

Money_Grabber13579

bowlhead99 wrote: »

You're right of course that you do get back the full £50k you invested, but his perhaps cryptic response is recognising that your £50k is worth less than that in today's terms, because the prices of an average basket of goods and services will have gone up by 2% or more in the meantime.

So the £50k you cash in will not buy as much as it buys today- as he says: "value probably of around £49k compared to what it was originally". The prizes (which will, more likely than not, be less than the headline rate of 1.4%) will go some way to making up the loss in purchasing power.

As the income from them is tax free, they can be useful for someone who has lots of interest income and has used up their 0% 'personal savings allowance", especially if you are a higher rate tax payer where saving tax on interest income is valuable.

But then to compare like with like, you’d have to say that putting the money in a 1.5% interest account would mean you would get back less than you put in. The reduction in what you get back might be ever so slightly less than premium bonds if you’re a basic rate tax payer but it would be more if you’re a higher rate tax payer.

Which all seems unnecessarily confusing, so much easier to say that if you sell £50k of premium bonds, you’ll get £50k back, plus prizes.

AnotherJoe

Good points perhaps my comment was too cryptic and unnecessary. Oops