Premium bonds

refluxer

If you drip-feed into Premium Bonds at around £100/month then you're likely to win nothing for many years, so it all depends on your reasons for choosing them - if you're doing it for a bit of fun (a chance at winning a million) then that's fair enough but if you're looking at it as an alternative to a savings account, then drip-feeding small amounts isn't the way to go. If you did this for 10 months as you suggested, then the chances are you won't win at all whereas if you paid £100/month into a Regular Saver for a year (for example), you would get a guaranteed return of at least 1% and quite a lot more if you can take advantage of one of the top 'existing customer' Regular Savers.

To give you an idea of what you might expect from Premium Bonds from my experience, I've had (gradually increasing) 5-figure sums invested for 9 years and during that time I've achieved somewhere around the advertised prize rate 4 times, below it 4 times and above it once. During that time, I've had 20 months where I haven't won anything and when I have won, prizes have been in multiples of £25. The biggest single prize I've ever won was £50.

Premium Bonds have been very popular for those with larger sums in the last few years because the expected prize rate of 0.9% was higher than the interest rate from most savings accounts, but you can now get up to 1% in a regular, easy access savings account so that advantage has been eroded. Many 'big savers' also do it for the tax-free nature of the prizes of course, when the Personal Savings Allowance for savings account interest is an issue.

Investing into a Stocks and Shares ISA is a whole different ball game of course and is definitely a consideration if you're looking at a long term strategy. As Stubod said, it all depends on what your goals are and whether you may need access to the money during that time.

eskbanker

little_green said:

If I had 50k on the other hand in a savings account at a 1% interest rate I'd be guaranteed £500 interest for a year. Am I likely to win that much on PBs? 

In simple terms PBS sound appealing to me as I can keep money there risk free & possibly win reasonably big. 

I would use it alongside s&s isa not in place of. So it would be for money that can't go into s&s ISA either because I need quicker access, as a holding place until it can go into s&s isa or if I've exceeded the allowance (wishful thinking lol) 

Of course I suppose I don't need to use it for money related to isa at all I could use it like a savings account .... 

You're not likely to win £500 on a £50K PB holding - it's a 37.8% chance according to MSE's premium bond calculator, whereas the median outcome is £450, i.e. a 0.9% return is the 'average luck' expectation.  There is a minuscule chance of a big prize, but generally it is more realistic to treat it as a savings account - PBs have been a reasonably tempting proposition in recent times, during which that 0.9% average return has exceeded typical savings accounts, but as rates rise for the latter, the differential is eroded....

Albermarle

little_green said:

Albermarle said:

Money in s&s ISA is essentially for retirement/FI 

Normally contributing to a pension is better if you are saving for retirement , especially if you have earned income .
Or maybe a LISA is you are under 40 .

Could you elaborate why? 
I'm under 40. I wish to retire early so I suppose ISA is to fund me in the gap between "retirement" & pension access. 

Pension has a tax advantage . You get tax relief on contributions and although you potentially pay some tax when you take the pension , there is a minimum tax advantage of 6.25% . It can be more depending on your exact circumstances . 
The disadvantage of a pension is the money is not accessible until your late Fifties , so if you want to retire earlier then having a S&S ISA to fill the gap is not a bad idea. 
A LISA is an alternative /add on to a pension . You get the 25% top up but no tax on the way out . Not accessible until age 60 and max you can add pa is £4K pa
The best strategy depends on your personal circumstances. How much you earn, what kind of pension do you have at work etc
With the state pension probably not kicking in until you are nearly 70 , you need plenty of funds if you want to retire early.

Pensions: Everything you need to know for retirement - MSE (moneysavingexpert.com)
Lifetime ISA (LISA): how they work & best buys - Money Saving Expert

Lisa can also be used for first time house purchase but you can ignore that part .

little_green

refluxer said:

If you drip-feed into Premium Bonds at around £100/month then you're likely to win nothing for many years, so it all depends on your reasons for choosing them - if you're doing it for a bit of fun (a chance at winning a million) then that's fair enough but if you're looking at it as an alternative to a savings account, then drip-feeding small amounts isn't the way to go. If you did this for 10 months as you suggested, then the chances are you won't win at all whereas if you paid £100/month into a Regular Saver for a year (for example), you would get a guaranteed return of at least 1% and quite a lot more if you can take advantage of one of the top 'existing customer' Regular Savers.

To give you an idea of what you might expect from Premium Bonds from my experience, I've had (gradually increasing) 5-figure sums invested for 9 years and during that time I've achieved somewhere around the advertised prize rate 4 times, below it 4 times and above it once. During that time, I've had 20 months where I haven't won anything and when I have won, prizes have been in multiples of £25. The biggest single prize I've ever won was £50.

Premium Bonds have been very popular for those with larger sums in the last few years because the expected prize rate of 0.9% was higher than the interest rate from most savings accounts, but you can now get up to 1% in a regular, easy access savings account so that advantage has been eroded. Many 'big savers' also do it for the tax-free nature of the prizes of course, when the Personal Savings Allowance for savings account interest is an issue.

Investing into a Stocks and Shares ISA is a whole different ball game of course and is definitely a consideration if you're looking at a long term strategy. As Stubod said, it all depends on what your goals are and whether you may need access to the money during that time.

eskbanker said:

little_green said:

If I had 50k on the other hand in a savings account at a 1% interest rate I'd be guaranteed £500 interest for a year. Am I likely to win that much on PBs? 

In simple terms PBS sound appealing to me as I can keep money there risk free & possibly win reasonably big. 

I would use it alongside s&s isa not in place of. So it would be for money that can't go into s&s ISA either because I need quicker access, as a holding place until it can go into s&s isa or if I've exceeded the allowance (wishful thinking lol) 

Of course I suppose I don't need to use it for money related to isa at all I could use it like a savings account .... 

You're not likely to win £500 on a £50K PB holding - it's a 37.8% chance according to MSE's premium bond calculator, whereas the median outcome is £450, i.e. a 0.9% return is the 'average luck' expectation.  There is a minuscule chance of a big prize, but generally it is more realistic to treat it as a savings account - PBs have been a reasonably tempting proposition in recent times, during which that 0.9% average return has exceeded typical savings accounts, but as rates rise for the latter, the differential is eroded....

Thank so from both those response it would seem that simply finding an account that pays at least 1% interest might be a preferable option for me then .... 

eskbanker

little_green said:

Thank so from both those response it would seem that simply finding an account that pays at least 1% interest might be a preferable option for me then .... 

My post was in response to a hypothetical £50K scenario anyway, which you say you don't have, so it's better to concentrate on what you do have and plan on that basis!

Returning to the situation explained in your OP, you were talking about £100 per month, which would be best deposited into a regular savings account (often at better than 1%), as highlighted by an earlier poster, unless it's money that you can lock away for the long term, in which case pension and/or S&S come into play....

Retirebefore50

I made one off small lump payments (200 and 100 as well as about £2k between 2015 and 2018). Then started a monthly SO beginning of 2019. Just to build up some PB's.

I didn't win my first prize till Mar 2021 and since have won a total of £125 (5 x £25). I don't win every month but it's nice when I do.  Have around £7.8k saved and don't miss the SO each month out of my account. I use PB as cash savings for retirement. Hoping to build up around £20-25k.

I know I could do a RS (I do this too by the way when funds permit and then move to my LISA).But it's a nice way to win a little something every now and again. 

At £100 a month I would personally top up my LISA for the tax uplift (if not utilising your pension). Or S&S ISA if you want access earlier than 60. 

I'm mid 40s now and utilising all of the above so I have a good mix.

Emmia

Personally, I use premium bonds for relatively easy access cash, rather than instant access cash... which is in a linked savings account to my bank account.

S&S ISA is for long term savings. I've no particular goal, but earlier retirement is probably one use (I also have a DB pension). 

I don't have the max in PBs so I save the minimum direct debit/standing order amount in each month which is £50 - any winnings are also reinvested as PBs.

Other savings are mostly into the S&S ISA - if I spend out of the linked instant access account, I top it back up again in subsequent months.

I'm certain some will mock my approach as not being super MSE, but for me this gives a good balance between certainty I have access to money if I need it quickly vs. long-term investment / looking after my future self.

Stubod

..and remember to put any money into PBs on the optimum date which I think is near the end of the month, as they have to be "in" for one full calendar before they take part in any draws.

ie if you put them in on the 1st of the month they will be "dead" for 2 months....

Albermarle

I'm certain some will mock my approach as not being super MSE, but for me this gives a good balance between certainty I have access to money if I need it quickly vs. long-term investment / looking after my future self.

You have a DB pension , a S&S ISA and cash/PB savings . All sounds good to me !

You may want to think about a separate DC pension/SIPP or a LISA if you are under 40 , instead of/in addition to the S&s isa , due to the fact that pension and LISA benefit from free money in the form of tax relief /bonuses , that the ISA does not .

It depends really on what you mean by early retirement .

Mutton_Geoff

I've got £50k worth of premium bonds. Over the last six months, my prizes have been

Oct - £0
Nov - £50
Dec - £100
Jan - £25
Feb - £25
Mar - £0

Total £200 working out to 0.8%, pretty close to the stated average. I've held the full amount of bonds on and off for over 20 years and have never won anything more than £200 in a month. I'm in for tax reasons alone.