Premium Bonds - £50k each?

VXman

csgohan4 said:

VXman said:

Never really 'got' premium bonds. Always seemed to me.to be better to.save in a interest bearing account than trust luck. However, given the level of interest rates avaliab!e now it.seems more understandable. Personally I'd still prefer to put 100K  in a.reasonably safe investment fund.

I had a friend with 6 accounts maxed.out (using other people's names) and always raged each month about how.much she won. What she never did was work out what the equivalent interest was. It would be interesting to know if she really did any better than a 1% savings account.

investment funds are not suitable for those that want quick access to money. PB seems a reasonable strategy to park an emergency fund, rather than low rate interest rate accounts. 

Imagine your investment drops 20% and you need some money now for a new boiler, your already on a loser. 

Investments should be for 5-10 years. not adhoc. Unless your short selling, in which case good luck

My investments are not really needed for quite a while and I have cash in various savings/current accounts at around 1%. When I say 'safe' funds I am referring to things like Vanguard Life strategy. I have money in a VLS 40 and apart from a short term dip in March -May it has steadily grown for 5 years.

If PB's can return near 1% then maybe thats not a bad idea now with other rates as low as they are.
I put £3K in last year just as an experiement. I did win £25 3 times in the first few months and was impressed. Nothimng since though. My wife did the same and has won nothing!

VXman

annabanana82 said:

I've got the max, had £650 in the first 12 months, 2 months into second year and only £25. I've never had more than a £25 prize.

With the person that knows someone that has 6 maxed accounts in others names, a big win might cause some issues if it goes into another person's account, nothing to stop them keeping it is there? Also what sort of due diligence do NS&I do when paying out, especially now that it's into nominated accounts, if 6 holders prizes all to same nominated account that should be noted surely?

The person I am referring to lives abroad and earns a fair wack. They transfer the money back to the UK every now and again when exchange rates are good and the accounts are in family members names (some nieces/nephews I think) They then buy rental properties when they have amassed enough money and then go through that process again.

Not sure the legality of all this but I guess it's a grey area that doesn't get noticed and for someone who is not interested in getting into investments etc then it's the simplest way to build a retirement fund.

eskbanker

VXman said:
When I say 'safe' funds I am referring to things like Vanguard Life strategy. I have money in a VLS 40 and apart from a short term dip in March -May it has steadily grown for 5 years.

Sounds like an unconventional definition of 'safe' that you're using - VLS40 is far from the highest risk investment but is also some distance from the bottom end of the scale.  Of course it's done well over the past five years - most investments have during the sustained bull run - but that's hardly a valid measure of long-term 'safety'!

VXman

Stubod said:

...IMHO having "small" amounts in PB's is a bit if a waste of time as the odds are you will not "win" anything and obviously over time you will lose money to inflation.

Probably - but is having 50K in PB's worth it? 

Slinky

VXman said:

Stubod said:

...IMHO having "small" amounts in PB's is a bit if a waste of time as the odds are you will not "win" anything and obviously over time you will lose money to inflation.

Probably - but is having 50K in PB's worth it? 

In the 12 months up to and inc November my OH and I have averaged 1.2%. In the 12 months up to and including October it was 1.8% due to a £500 win last year.

Stubod

VXman said:

Probably - but is having 50K in PB's worth it? 

..depends on what your take on "worth it" is. The reason I say small amounts are probably not worth it is that statistically you are less likely to achieve the headline rate. If you have the max. amount saved then you are more likely to achieve the headline rate. If you are happy with that rate, (with a small chance of getting a bigger win!?), then for me I consider it worth it given the pitiful rates that are now available elsewhere? (where else outside of investing can you get the same level of interest and security on that sort of amount?. We also have some S&S ISA's and "regular" savers...each to their own I guess....

dcweather

Martin's arguments about premium bonds miss out some important points that have become much more valid. Firstly people with a lot of money to invest, say £50k are not going to worry about this savings account and that savings account paying £35 a year more than another one!! With interest rates so low the marginally lower rate of Premium Bonds makes them well worth it. For at least three reasons:- 1. You get to gamble but don't, like the lottery, lose your stake every time. (Yes, you could argue that it is an investment in worthy causes and it is, but this is about personal income - not altruism!). 2. Everything Martin says assumes average luck, but some people get lucky. This year I was at 3.5% after six months but now it has fallen back but I am going to end the year with at least 1.8%. Where else could I have got that at the lowest possible risk. Yes the Stockmarket might have beaten that but you could have lost 30% this year if you got it wrong! Next year I might have below average luck and over a long term investment it will probably be average. So yes, I might end up say 0.25% down on the best long term savings account - £125 over a year. 3. Someone will be very lucky - and win a lot of money - it might just be you and it is a lot of fun checking each month to see what you have won. On £50k this year I have had from £0 to £200 on individual months, all multiple £25's so it shows how variable the luck is month on month.
The above comments are based on a relatively large PB investment.

VXman

dcweather said:

Martin's arguments about premium bonds miss out some important points that have become much more valid. Firstly people with a lot of money to invest, say £50k are not going to worry about this savings account and that savings account paying £35 a year more than another one!! With interest rates so low the marginally lower rate of Premium Bonds makes them well worth it. For at least three reasons:- 1. You get to gamble but don't, like the lottery, lose your stake every time. (Yes, you could argue that it is an investment in worthy causes and it is, but this is about personal income - not altruism!). 2. Everything Martin says assumes average luck, but some people get lucky. This year I was at 3.5% after six months but now it has fallen back but I am going to end the year with at least 1.8%. Where else could I have got that at the lowest possible risk. Yes the Stockmarket might have beaten that but you could have lost 30% this year if you got it wrong! Next year I might have below average luck and over a long term investment it will probably be average. So yes, I might end up say 0.25% down on the best long term savings account - £125 over a year. 3. Someone will be very lucky - and win a lot of money - it might just be you and it is a lot of fun checking each month to see what you have won. On £50k this year I have had from £0 to £200 on individual months, all multiple £25's so it shows how variable the luck is month on month.
The above comments are based on a relatively large PB investment.

A reasonable argument for the merits of PB's. I would just take issue with a couple of points.
"people with a lot of money to invest, say £50k are not going to worry about this savings account and that savings account paying £35 a year more than another one!!"
I would put myself in the category of having 'a lot of money' and I care (not worry) about £35 here and there. Look after the pennies and all that. I imagine a lot of folks on MSE forums are in this category
.
I have money in 2 Coventry Double Access accounts. (one directly with Coventry and the other through HL active savings) So effectively quadruple access. Up to £85K  protected at 1.05%. On £50K that's £525 in a year. A reasonable return (these days) for instant access and assured return not based on luck.
Having said that - I might well top up my PB account and see how it does.