premium bonds and / or GILTS as a tax shelter

olb81

I am potentially going to avoid buying a property, and instead lodge or rent.

So I will have over 100k to save which I can't put into an ISA or pension all at once.

Talking to AI suggested I could put 50k into premium bonds.

It also said the remainder I could buy GILTS which have a short term such as TN28 as another way to avoid tax.

Is this something people do often?

InvesterJones

I don't talk to AI about investments, no.

Main thing is not to worry about avoiding tax, but simply look for the best return and savings characteristics that you're looking for.

I really like gilts for their predictable return on maturity, so if you are looking to put money away for a couple of years or more but don't want the volatility of equities then they're a fantastic option, especially if a high tax payer (on low coupons) and you've already used other viable options like pension as you mention you can't (any more).

olb81

let say the GILT returns 4% (im guessing)

and the vanguard fund returns 10%

even with paying tax on the dividends, surely the vanguard fund would be better off?

EthicsGradient

https://forums.moneysavingexpert.com/discussion/comment/82147484#Comment_82147484

What is "the vanguard fund" you're talking about?

I agree with InvesterJones that AI is not a starting point. Perhaps if you are an expert at phrasing questions for AI, it might produce some "typical advice", but I'd point out that you have given us nowhere near enough information for us to produce anything useful for you, beyond InvesterJones' maxim "look for the best return and savings characteristics that you're looking for". This means knowing how long you're willing to have money saved or invested, the risks you're OK with taking, and things like how much of your personal savings allowance is available in each year concerned, your marginal tax rate, how much you could put in an ISA and/or SIPP each year, and so on.

sheenas

Most people buy a house for a reason and that because it's always been a solid performed and dual roles as a home. Maybe consider buying a house that can increase in value by being renovated and/or extended. As other have said , don't listen to AI

Middle_of_the_Road

https://forums.moneysavingexpert.com/discussion/comment/82147484#Comment_82147484

The Vanguard fund could equally loose 10% or more. The return from gilts is guaranteed.

olb81

for example, the vanguard VWRL / VWRP or VHVG / VEVE

EthicsGradient

OK, so you are contemplating investing in a world equity index tracker. That is radically different from Premium Bonds or a low-coupon short term gilt, so you can't really compare them - the tax situation is irrelevant.

Sort out first what your goals are, in terms of length of savings/investment (the 25 years you might have been paying a mortgage off for? Until you retire - when is that likely to be? Or just a few years before you think again?)

dunstonh

https://forums.moneysavingexpert.com/discussion/comment/82147521#Comment_82147521

So, more like 40% loss potential than 10%.

lets go back to your first post:

So I will have over 100k to save which I can't put into an ISA or pension all at once.

Let us start with your objective. What is it?

Without knowing your objectives, asking us which solutions you need will not yield useful answers.

olb81

my objective is to live on my wages, while at the same time having a pot of wealth growing in the background in ISAs and pension to afford me financial independence in 10-20 years!

olb81

the current pension is 52k and i also have 145k in instant savings and 20k in an ISA.