Loaning money to family members to invest in P/Bonds

col.escargot

Hi MSE fans !   I'm not sure where I should have posted this question,  as it falls across a few categories, but I hope you will forgive me and can give me some advice

I've just retired from my job and wanted to pay off my mortgage from my pension lump-sum.  But this will cost me nearly £2k in early repayment charges (which I resent paying!).   However, in 2 years from now I'll be allowed to pay off the mortgage without incurring any fees.

Rather than leave the cash in a very low interest-rate account for 2 years, I'd like to transfer some of it to the bank accounts of family members so they can buy Premium Bonds -- with the hope of winning the £1M prize!       Then in 2 years time, they will cash-in the Bonds and transfer the money back to me,  so I can close my mortgage.

I see this as a 2-year "loan" -- but is it allowed;  will the Premium Bond people ask where the money has come from;  and is there tax implications etc etc ?

Many thanks all

Alter_ego

NSANDI will not ask where cash has come from.  I would not advise "lending" any cash you are not prepared to lose. Especially to family or friends.

dunstonh

It is allowed.  However, you are, on paper gifting them the money and reliant on them returning it unless you draw up an agreement.  If they die, it would be assumed to be part of their estate without evidence otherwise.

eskbanker

NS&I are unlikely to ask questions about the source of the money but if you want to loan large sums to family members then make sure that you get these formally documented as actual loans* (i.e. not "loans" with inverted commas), covering all scenarios, including what happens to winnings.  PB prizes aren't taxable so that's one less thing to worry about, but inheritance tax could come into play if any of those involved passes away during those two years....

* Cautionary tale at https://forums.moneysavingexpert.com/discussion/6253979/help-desperately-needed/p1

Sea_Shell

Think worst case scenario...

Would you be prepared to take family to court to enforce any loan agreement?

[Deleted User]

Buy the premium bonds yourself and just give the family member a share of the £1 million winnings.

Or not.

MX5huggy

Deleted_User said:

Buy the premium bonds yourself and just give the family member a share of the £1 million winnings.

Or not.

I presume the OP has their £50k already. 

DireEmblem

You have said in 2 years you can pay off your mortgage fee free.  How much is your 2 years worth of interest in comparison to the early repayment fee?

col.escargot

MX5huggy said:

Deleted_User said:

Buy the premium bonds yourself and just give the family member a share of the £1 million winnings.

Or not.

I presume the OP has their £50k already. 

Yes, correct .

col.escargot

DireEmblem said:

You have said in 2 years you can pay off your mortgage fee free.  How much is your 2 years worth of interest in comparison to the early repayment fee?

It will be about £800

col.escargot

eskbanker said:

NS&I are unlikely to ask questions about the source of the money but if you want to loan large sums to family members then make sure that you get these formally documented as actual loans* (i.e. not "loans" with inverted commas), covering all scenarios, including what happens to winnings.  PB prizes aren't taxable so that's one less thing to worry about, but inheritance tax could come into play if any of those involved passes away during those two years....

* Cautionary tale at https://forums.moneysavingexpert.com/discussion/6253979/help-desperately-needed/p1

Many thanks for the reply.   Do you know if there's a template document available with all the right 'small print' ?