Interest Rate on Savings vs Premium Bonds

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Comments

  • Stubod
    Stubod Posts: 2,166 Forumite
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    Unless you can afford to "max out" on premium bonds, I would be inclined to go with the best savings account you can find rather than PBs...but that's just me...
    .."It's everybody's fault but mine...."
  • 400ixl
    400ixl Posts: 2,786 Forumite
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    If you aren't at the point where you have maxed out the interest you can earn before being taxed, the a high rate savings account is probably a better place for your money.

    Having hit that point I have investing also in Premium Bonds and am on a rolling year at about 5% interest from them, which when you take in the higher rate tax element is quite a bit more than I would be getting in a savings account.

    But equally I could go several months with nothing, thats the risk.

    As others have mentioned, you need to think about what you are saving for and when do you think you may want access to the money.

    Are you saving for retirement, then plough it into a pension and get the tax element. Saving for long term the Shares may be a good investment. Saving for something mid term then a fixed 3-5 year savings account may be best given the current higher interest returns. Something short term then an easy access.

    The short to mid terms can return a better rate than you are getting now with no risk to the capital.
  • nickpe
    nickpe Posts: 152 Forumite
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     said:
    Unless you can afford to "max out" on premium bonds, I would be inclined to go with the best savings account you can find rather than PBs...but that's just me...

    Quick question - if for example I was to purchase £15k worth of premium bonds and “max out”.

    how quickly can you exchange the premium bonds back to money should you need it for anything?
  • Barkin
    Barkin Posts: 420 Forumite
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    nickpe said:
     said:
    Unless you can afford to "max out" on premium bonds, I would be inclined to go with the best savings account you can find rather than PBs...but that's just me...

    Quick question - if for example I was to purchase £15k worth of premium bonds and “max out”.
    I suspect "max out" was intended to mean going for the maximum allowed (50k) holding. 
  • Martico
    Martico Posts: 967 Forumite
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    nickpe said:
     said:
    Unless you can afford to "max out" on premium bonds, I would be inclined to go with the best savings account you can find rather than PBs...but that's just me...

    Quick question - if for example I was to purchase £15k worth of premium bonds and “max out”.

    how quickly can you exchange the premium bonds back to money should you need it for anything?
    When you withdraw your bonds, expect a wait of a few days, they're pretty quick but not instant
  • Beddie
    Beddie Posts: 617 Forumite
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    nickpe said:
    I think I’m more wondering abouts the idea of purchasing £10k worth of premium bonds vs keeping the money in savings accounts.

    good idea/bad idea?
    Go for it! You've little to lose (a bit of interest) and you might do well.

    Come back in a year and tell us how it went.
  • cwep2
    cwep2 Posts: 202 Forumite
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    Generally PBs are best suited for those savers that either:
    1) would be paying higher rate tax on interest in a savings account = (obviously) a higher rate tax payer anyway, but earning more than tax free interest amount (£500 in that case) and having used up ISA allowance. 
    2) like the gambling / lottery side of PBs. You might not win, but you have a chance of winning big. Think of it like savings account where all the interest is used buying lottery tickets - some months you get zero, some months £25 or £50, some months £200 and slim chance of £10k/£50k/£1mio etc. But your original capital is safe and can be withdrawn at any time (with a couple days notice). 

    One thing to bear in mind, you need to buy bonds before end of month to be included in the draw just over a month later. So if you buy a bond on 31st Oct you will be in the draw where you find out prizes on 2nd working day of Dec (prizes paid a couple days after that) but if you buy the bond 1st Nov you would only qualify for the draw a month later. So particularly for regular savings make sure you are buying PBs at end of month not the start. 

    Similarly if you withdraw money from PBs best time to do it is after the draw, so in the first week of the month. Basically every day you put money in to PBs before last day of month or take out after 2nd day of month you aren’t getting anything for those extra days, may as well have it in savings account earning interest. 
  • friolento
    friolento Posts: 1,136 Forumite
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    Just this morning, I read the Monevator blog on Premium Bonds.

    https://monevator.com/are-premium-bonds-a-good-investment/

  • Eco_Miser
    Eco_Miser Posts: 4,708 Forumite
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    cwep2 said:

    Similarly if you withdraw money from PBs best time to do it is after the draw, so in the first week of the month. Basically every day you put money in to PBs before last day of month or take out after 2nd day of month you aren’t getting anything for those extra days, may as well have it in savings account earning interest. 
    When you withdraw there is an option to wait until after the next draw, so you can fill in the form at the end of the month, participate in the draw on the first of the next month, then get your money as soon as possible after it; rather than starting the process in the new month.

    Eco Miser
    Saving money for well over half a century
  • Catplan
    Catplan Posts: 360 Forumite
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    From the info given, I’d probably go with a high EA account say 5%, then drip feed the money into various RS accounts, you can currently get various accounts between 8 and 6% paying in sums between £200   - £400 (£500 if existing ybs member).

    Just make sure to read t&c’s as some Easy access accounts limit, or reduce interest after so many withdrawals.
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