ISA, Premium Bonds

Carol1963

Thank you all for your help.  It's a little hard sometimes when you're trying to make decisions on your own.

Kim_13

Emmia said:

If you're just trying to build an emergency fund, I'd have thought a straight savings account would be more appropriate - ISAs and PBs are things more suited to longer term investment.

Definitely so for ISAs, but Premium Bonds could be handy for this purpose in that the money is ‘out of the way’ but accessible within a few days in case of an emergency. For someone who hasn’t been able to save, a standard savings account and the instant transfers that usually come with it might be counterproductive.

Something like the Stafford Building Society Regular Saver might be useful, as it is limited to 4 withdrawals a year (therefore an incentive to keep it to emergencies) and can be maintained with £25 per month. They require the passbook to be posted for a withdrawal, so it will take a few days to get the cash as with Premium Bonds.

Presumably any interest received would need to be declared to the DMP provider as a change in income, whether from an ISA or otherwise so it might be best to stick with PBs until the debts are cleared. 

Emmia

Kim_13 said:

Emmia said:

If you're just trying to build an emergency fund, I'd have thought a straight savings account would be more appropriate - ISAs and PBs are things more suited to longer term investment.

Definitely so for ISAs, but Premium Bonds could be handy for this purpose in that the money is ‘out of the way’ but accessible within a few days in case of an emergency. For someone who hasn’t been able to save, a standard savings account and the instant transfers that usually come with it might be counterproductive.

Something like the Stafford Building Society Regular Saver might be useful, as it is limited to 4 withdrawals a year (therefore an incentive to keep it to emergencies) and can be maintained with £25 per month. They require the passbook to be posted for a withdrawal, so it will take a few days to get the cash as with Premium Bonds.

Presumably any interest received would need to be declared to the DMP provider as a change in income, whether from an ISA or otherwise so it might be best to stick with PBs until the debts are cleared. 

Presumably any PB prizes (which could be reinvested into PBs) would also need to be declared in this scenario?

Kim_13

Emmia said:

Kim_13 said:

Emmia said:

If you're just trying to build an emergency fund, I'd have thought a straight savings account would be more appropriate - ISAs and PBs are things more suited to longer term investment.

Definitely so for ISAs, but Premium Bonds could be handy for this purpose in that the money is ‘out of the way’ but accessible within a few days in case of an emergency. For someone who hasn’t been able to save, a standard savings account and the instant transfers that usually come with it might be counterproductive.

Something like the Stafford Building Society Regular Saver might be useful, as it is limited to 4 withdrawals a year (therefore an incentive to keep it to emergencies) and can be maintained with £25 per month. They require the passbook to be posted for a withdrawal, so it will take a few days to get the cash as with Premium Bonds.

Presumably any interest received would need to be declared to the DMP provider as a change in income, whether from an ISA or otherwise so it might be best to stick with PBs until the debts are cleared. 

Presumably any PB prizes (which could be reinvested into PBs) would also need to be declared in this scenario?

I’d have thought that’d be easier though - less chance of winning any on small sums and as they are prizes rather than interest, the DMP provider could hardly say that the same were likely to be earned next year (HMRC do this with interest.) In a downward interest rate environment, such a projection being made could cause the OP issues as they wouldn’t receive that sum unless the balance increased sufficiently to cancel out the downward movement in rates.

I haven’t had a DMP so I can’t say whether they would forward project like this, require notification every time a variable rate changed etc - but it struck me that PBs were likely to mean the OP needed to correspond with the DMP provider less often.

masonic

Kim_13 said:

Emmia said:

Kim_13 said:

Emmia said:

If you're just trying to build an emergency fund, I'd have thought a straight savings account would be more appropriate - ISAs and PBs are things more suited to longer term investment.

Definitely so for ISAs, but Premium Bonds could be handy for this purpose in that the money is ‘out of the way’ but accessible within a few days in case of an emergency. For someone who hasn’t been able to save, a standard savings account and the instant transfers that usually come with it might be counterproductive.

Something like the Stafford Building Society Regular Saver might be useful, as it is limited to 4 withdrawals a year (therefore an incentive to keep it to emergencies) and can be maintained with £25 per month. They require the passbook to be posted for a withdrawal, so it will take a few days to get the cash as with Premium Bonds.

Presumably any interest received would need to be declared to the DMP provider as a change in income, whether from an ISA or otherwise so it might be best to stick with PBs until the debts are cleared. 

Presumably any PB prizes (which could be reinvested into PBs) would also need to be declared in this scenario?

I’d have thought that’d be easier though - less chance of winning any on small sums and as they are prizes rather than interest, the DMP provider could hardly say that the same were likely to be earned next year (HMRC do this with interest.) In a downward interest rate environment, such a projection being made could cause the OP issues as they wouldn’t receive that sum unless the balance increased sufficiently to cancel out the downward movement in rates.

I haven’t had a DMP so I can’t say whether they would forward project like this, require notification every time a variable rate changed etc - but it struck me that PBs were likely to mean the OP needed to correspond with the DMP provider less often.

I don't know the answer either, but I'd be more concerned that the amount put into premium bonds would not be large enough to generate any prizes. That's assuming the DMP is in place because the OP's finances are not good and the situation has not markedly improved since.

Bravepants

I believe Cahoot are offering an instant saver account at 4.85% (interest paid annually) or 4.75% (interest paid monthly) for 12 months. If you are going to earn less than £1000 interest in a year then this is a good example of the thing you should be looking at. If you've got £20k to put away only then think ISA. 

Also the chance of winning a PB prize each month is something like 21000 to 1. You are best having more than £21000 in PBs to better your chances of at least winning the smallest prize of £25 each month. The more you have in PBs up to the maximum of £50000 the higher your chance of achieving a return equivalent to the annual interest rate of 4.4%.