Premium bonds for emergency fund?

[Deleted User]

I have my emergency fund of a few months of income sat in a normal savings account at present. It's earning next to nothing in interest but it's safe and I can get to it at short notice. Kind of the two main requirements of an emergency fund.

But I'm thinking of moving most of it to premium bonds. I understand that premium bonds don't pay any interest so if you don't win, then over time the effective value falls due to inflation, but I see that as an insignificant risk, given the negligible interest the money is earning now.

I see it as, things could get a lot better, but as far as that particular pot of money is concerned, it can't really get worse.

But I do have unanswered questions following my research. 

In an emergency, how quickly can you turn your premium bonds back into readies? 

And is there more than one provider, and if so, are there good ones and ones to avoid? 

Any other insightful tips on this topic?

Thanks in advance. 

wjr4

Premium bonds are run by NS&I only. You can access them easily, not instantly, takes a few days for the money to hit your bank. They aren’t as good as they used to be as returns are significantly lower. 

eskbanker

Beardybaldy said:

But I do have unanswered questions following my research.

You need to improve your researching techniques!

It's an NS&I product and nobody else sells them, all the details are at:
https://www.nsandi.com/products/premium-bonds
https://www.nsandi.com/files/asset/pdf/premium-bonds-brochure.pdf
https://www.nsandi.com/help/manage-your-savings/make-withdrawal-from-savings#payment-timeline-calculator

[Deleted User]

eskbanker said:

Beardybaldy said:

But I do have unanswered questions following my research.

You need to improve your researching techniques

I take your point, and thanks for the info, but I think my research skills are kind of OK. I Google it, I then check things like companies House and the FCA to make sure I'm not about to be scammed if it's a company I've never heard of previously, I watch some stuff on YouTube, and finally I come with fairly open ended questions to a forum where I think there will be people with far more experience than me in these matters, and take on board every piece of input kindly offered.  

ranciduk

When I first bought mine I tried cashing in a small amount to see how long it takes to get your money back

money was back in my current account in under a week I think 

Michael_Nottingham

With Premium Bonds you have the choice to wait until after the next draw or get the cash as soon as you can
ranciduk - my experience tallies with yours - its normally something like 3 WD - 1 week from memory

MrsPorridge

Yes I cashed in some recently, it takes 3 working days to hit your account.

Michael_Nottingham

I use my Premium Bonds as my emergency fund.

One more thing - just remember that if you put money in on the 1st, it wont be in the draw for almost 2 months - so optimal time to put your money in is at the end of a calendar month (though with interest rates where they are probably not an issue).
You have to have the money in when they do the draw to get included - hence you can tick a box when withdrawing money to only get your money out after the draw.

Personal view is that they generally work best for higher rate tax payers / people who have maxed out their Personal Savings Allowance - as they are tax free and don't have to be included on a tax return.

[Deleted User]

Michael_Nottingham said:

I use my Premium Bonds as my emergency fund.

One more thing - just remember that if you put money in on the 1st, it wont be in the draw for almost 2 months - so optimal time to put your money in is at the end of a calendar month (though with interest rates where they are probably not an issue).
You have to have the money in when they do the draw to get included - hence you can tick a box when withdrawing money to only get your money out after the draw.

Personal view is that they generally work best for higher rate tax payers / people who have maxed out their Personal Savings Allowance - as they are tax free and don't have to be included on a tax return.

Thanks for this. I'm curious though about your tip that they work better for higher rate tax payers. This implies I'm missing a trick here (which is likely, I've only just started to look beyond conventional bank accounts). I've just opened a stocks and shares ISA for my longer term savings. That can't qualify as an emergency fund because of course it could drop significantly at any time, and even if its stable, I believe it can take a while to sell the funds back for cash. The other tax free option that I'm aware of is a cash ISA, but I've not seen any with interest rates that are any good. Obviously 0.1% is better than 0%, but the reason I'm attracted to premium bonds is that although generally they won't grow, there is a chance of a win, so it's like a free version of the lottery from what I can gather. Unless I'm misunderstanding something, which as I alluded to, is very possible.

On a related note, I have another question if I may. On the website it says the odds of winning are 34,500 to 1, per £1 invested. Sounds crazy, but by my reckoning, if I put £5k in, we get closer to 7:1 which is better. But what I couldn't find on the website is the detail behind the statistic. Is that 34,500 to 1 chance of winning EVER, or per draw? 

DireEmblem

https://www.moneysavingexpert.com/savings/premium-bonds-calculator/

^^ I think you're looking for this information.

What I would also suggest, is that with your emergency fund, spread it out.  Put say 1k in a Virgin Money account to earn 2%, and see what else is out there as well.  Just means that if all hell were to break loose, and one of the institutions you had your funds at had any difficulties with their online systems, you can access the others as a backup.

TheAble

Beardybaldy said:

Michael_Nottingham said:

I use my Premium Bonds as my emergency fund.

One more thing - just remember that if you put money in on the 1st, it wont be in the draw for almost 2 months - so optimal time to put your money in is at the end of a calendar month (though with interest rates where they are probably not an issue).
You have to have the money in when they do the draw to get included - hence you can tick a box when withdrawing money to only get your money out after the draw.

Personal view is that they generally work best for higher rate tax payers / people who have maxed out their Personal Savings Allowance - as they are tax free and don't have to be included on a tax return.

Thanks for this. I'm curious though about your tip that they work better for higher rate tax payers. This implies I'm missing a trick here (which is likely, I've only just started to look beyond conventional bank accounts). I've just opened a stocks and shares ISA for my longer term savings. That can't qualify as an emergency fund because of course it could drop significantly at any time, and even if its stable, I believe it can take a while to sell the funds back for cash. The other tax free option that I'm aware of is a cash ISA, but I've not seen any with interest rates that are any good. Obviously 0.1% is better than 0%, but the reason I'm attracted to premium bonds is that although generally they won't grow, there is a chance of a win, so it's like a free version of the lottery from what I can gather. Unless I'm misunderstanding something, which as I alluded to, is very possible.

On a related note, I have another question if I may. On the website it says the odds of winning are 34,500 to 1, per £1 invested. Sounds crazy, but by my reckoning, if I put £5k in, we get closer to 7:1 which is better. But what I couldn't find on the website is the detail behind the statistic. Is that 34,500 to 1 chance of winning EVER, or per draw? 

Per draw. Odds of winning at least £25.