Your Premium Bonds sales pitch: why are they a good idea?

MX5huggy

Type_45 said:

MX5huggy said:

Once you’ve decided you want easy access to to a large ish sum of money where else would you put it at the moment. When they paid 1.5% and you could get 3% in a bank account I didn’t bother. Now you can only get 0.5% in a bank account they win for now.  

A cash ISA?

I’m not using my ISA allowance so I can get 0.54% on easy access cash. Over 0.9% on PB’s.

Type_45

I'm looking to build up some cash at the moment.  Have a few grand in my Santander 123 account.  Hope to build up to £10K by the end of the year.

So Premium Bonds, and not ISAs is the best place to put it?   Any recommendations?  

[Deleted User]

The amount I hold goes up and down, £15-30k, I win at least £25 a month, sometimes £50. Better than any interest rate available. 

MX5huggy

Type_45 said:

I'm looking to build up some cash at the moment.  Have a few grand in my Santander 123 account.  Hope to build up to £10K by the end of the year.

So Premium Bonds, and not ISAs is the best place to put it?   Any recommendations?  

@Type_45 I’m a bit confused because you seem quite sophisticated with your posts about investing and crypto. But yes PB’s over cash ISA. Then if you don’t want to switch bank accounts and I didn’t change the 123 account to a 123 Lite account you get the same cash back on bills but no interest on balance which is naff all now and even less as you will have a lower balance, and the fee is £2 per month instead of £4. 

OldScientist

eskbanker said:

The median return will be around 0.9% for pretty much any non-trivial holding and duration, but larger amounts and/or periods will gradually reduce the standard deviation.  This effectively means that the chances of that specific median +/- 10% from a small holding for a year may be, say, 25%, but over a longer time it would reach, say, 90%.

You are entirely right - here are the lower decile (bottom line), median (middle line), and upper decile effective interest rates for a number of bonds held for a single year. 80% of people will obtain an effective interest rate between the lower and upper lines (i.e. with 50k bonds you'd expect an interest rate of between about 0.6% and 1.2% for 4 years in 5).



ps I know that an individual cannot hold more than 50000 - but couples can (hence the slight extension to 60k)

maisie_cat

I use premium bonds as easy access money with the added bonus of a potential win. I have won £25 each month for the last 4 on £10000 which is more than my FD savings account. The money takes 3 days to access and it would take a pretty dire emergency to not be able to cover 3 days.

Zanderman

Type_45 said:

I know someone who has £50K in premium bonds.  She gets about £25 a month, I think.   No chance of capital loss, but no chance of capital gain either...

Can anyone give me a reason why they might be a good idea?  

The whole premise of premium bonds is that there IS a chance of capital gain!

Not sure how you can have missed that fact.

The key word - your own actually - is 'chance'. 

steampowered

Sea_Shell said:

What sort of amount saved in Premium Bonds is the "sweet spot" for the chances of winning close to the 1%.

Far more than anyone should sensibly have in premium bonds.

If you have £35k+ to stick into premium bonds, learn the basics of investing and invest it.

AlanP_2

steampowered said:

Sea_Shell said:

What sort of amount saved in Premium Bonds is the "sweet spot" for the chances of winning close to the 1%.

Far more than anyone should sensibly have in premium bonds.

If you have £35k+ to stick into premium bonds, learn the basics of investing and invest it.

Not if you are using cash as the "safe" asset in your portfolio as an alternative to bonds, or as a hedge against markets falling whilst in drawdown.

There is more than one way to skin a cat and depending on your objectives and personal situation PBs may well have a role to play.

Type_45

Zanderman said:

Type_45 said:

I know someone who has £50K in premium bonds.  She gets about £25 a month, I think.   No chance of capital loss, but no chance of capital gain either...

Can anyone give me a reason why they might be a good idea?  

The whole premise of premium bonds is that there IS a chance of capital gain!

Not sure how you can have missed that fact.

The key word - your own actually - is 'chance'. 

What chance is there?  Give me the odds.