Best "minimal risk" investment for 3 years

Newbie_John

I'll skip gilts as don't know much about them, with premium bonds and having £50k there, "some win" is almost guaranteed, just the amount could vary a lot, for max £50k invested:
Each year, you have an 80% chance of winning between £1,450 and £2,900 (2.90% and 5.80%).
Outside of that range is £0 as well as £1000000, but the chances are as follow:

Expected frequency of each prize:
£25	Every two months
£50	1.0 prizes per month
£100	1.0 prizes per month
£500	Every four years
£1,000	Every eleven years
£5,000	Every 112 years
£10,000	Every 225 years
£25,000	Every 560 years
£50,000	Every 1,121 years
£100,000	Every 2,254 years
£1,000,000	Every 101,429 years

   

Albermarle

sgog said:

Newbie_John said:

I think some numbers may be helpful here:
- what tax rates are you both on?
- how much money are we actually talking?
- how old are you? (as it could be worth to put more money to pension, especially if you're on 40% tax+)

Other tax free option are Premium Bonds up to £50k each.
Next April new ISA allowance starts so again £20k each.

And if you're on 20% tax, then best saving account of 6% even after tax gives you 4.8% so that's not that bad.

Thanks, Newbie_John.
We are both higher tax rate payers, and we're talking about upwards of £200k.
(6% gross would give 3.6% net interest. Which is fine but not great  )


We plan to fully utilise the ISA allowances, but there would still be extra money that we want to earn interest on.

Premium bonds are fine in terms of safety, but their yield is not guaranteed and seems lower than the above-mentioned gilts?

Returns from PB's are not guaranteed, but if you held the full £50k for 3 years, you would very very likely get close to the typical average return. Although the official average return is 4.6% , this is skewed by the Million Pound prizes, where the actual chance of winning is miniscule. A more realistic rate of return is between 3.6% and 4% ( it depends on your understanding of what type of average is being used) Tax free so equivalent to 6.3% gross.

sgog

Thanks a lot, @everyone. To add to the PB discussion: even if we were to put the full allowed amount in these, we'll still need to figure out what to do with the rest .

george4064

If I were you, I’d buy a low coupon gilt and hold to maturity (hence majority of the gain will be a capital gain rather than in the coupon payment itself, therefore tax efficient).

Its then ultimately down to you which gilt(s) to buy, and how you want to line it up with when your mortgage fixed period ends.