Premium bonds

Slinkie

Slinkie

Slinkie

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Joined
21 Oct 2002
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1,680
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UK
Hi Folks,

I am looking to shove some of my savings somewhere where I have less easy access to them. I don't really have a lot at the moment having just paid off all my debt but now I am debt free my savings are going to start increasing rapidly. I am usually pretty good with my money but I do have occasions where I take some of my savings out and buy something stupid just because I can (usually when I am really bored).

I want to put my savings somewhere less accessable and so was thinking of premium bonds. I know I'll probably lose out on the interest ( I'm not doing it thinking I will win loads of the prize draws) but I'd rather have money put away I can't spend not earning a lot to money earning 5-6 % I can easily access.

I have looked over the site but can't find all the info I want before I invest. Although no interest in earned with the investment, does the investment increase with inflation? So if I put £100 in today in 5 years time will I withdraw £100? I presume it does but I couldn't see anything on the site about it.

Also, is it usually easy to get the money out when you do need it? The site says 8 working days (which is fine as it'll make it less likely I'll withdraw it) but is it reliably 8 working days or can it take longer?

What are your experiences of Premium bonds?

Thanks

Matt
 
I'm sure you can get some kind of one year minimum savings accounts but that might be a bit too hard access.

I throw £100 into Premium Bonds every month. I know all about Premium bonds and how they're a bad investment but like you i'm just spreading my money around, some in places where it's harder to get to quickly. I have a lot of disposable income at the end of the month so i'm not bothered.
 
I'd go to a bank for a short term bond, usually you can get 3, 5 and 7 year investment terms at a fixed rate. You'll find there's usually a minimum investment of ~£5,000 though. The basic idea being you get your initial investment back, plus whatever the interest is.

Or you could go for a government bond, which are usually longer term (circa 10 years if I recall), but are guaranteed (bank bonds whilst being very reliable could end up losing value if there is a market crash for example). Same rules usually apply.

Or you could go for a gilt, which can be short term (3 months) or very long term (50 years), for retirement.

There's also the possibility of looking abroad - I've been wondering if it might be a good investment to get a Treasury (US bond), due to the problems over there at the moment, there might be some good rates about. Plus as you're buying in dollars, you could end up making a really good return - you'd need to do some planning though, and also take into consideration the fact that you might get less out if the Sterling<>Dollar rate crashes.

On top of all that though, carry on sticking £3,600 a year into your ISA, and paying into a pension.


Edit: Er I just read the topic and realised I ignored what you'd asked for. Hopefully some of this will still be useful to ya :p.
 
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Pretty sure that Martin Lewis did an article on this saying that even if you won the average winnings you'd be better off with a high interest ISA or savings account. Of course this relies on having decent savings rates rather than keeping savings in a poorly performing account.
 
Mad old tory said:
Pretty sure that Martin Lewis did an article on this saying that even if you won the average winnings you'd be better off with a high interest ISA or savings account. Of course this relies on having decent savings rates rather than keeping savings in a poorly performing account.
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Yeah, you usually need to move your ISA every couple of years, if not every year, depending on when the special offer to entice you in wears off.

Most people simply forget that they can move their ISA, or get put off by the existing wrapper provider trying to make things difficult.
 
platypus said:
Most people simply forget that they can move their ISA, or get put off by the existing wrapper provider trying to make things difficult.
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You also have to bear in mind that there are often penalty clauses, like losing a month's interest. So unless you have a good lump in the ISA it's sometimes not worth the effort of moving the money around.

Obviously you have to keep an eye on things though. Banks love those of us who're too lazy to move things around.

As for PBs... I have a few thousand tucked away out of easy reach, but I know it's a stupid 'investment', especially now (real world as opposed to the laughable CPI) inflation's starting to rise. But it gives me a few seconds of excitement every month when I check the website. At my age that's probably as much of a thrill as I dare have. ;-)

Andrew McP
 
Andrew_McP said:
You also have to bear in mind that there are often penalty clauses, like losing a month's interest. So unless you have a good lump in the ISA it's sometimes not worth the effort of moving the money around.
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Well that's what I meant by existing provider making things difficult. I wouldn't personally buy into an ISA that wouldn't let me move after 2 years tops.
 
If you don't want easy access to it, then get a Regular Saver. This involves you putting £250 a month into the account and you can't take it out until the end of the year. The interest rates are high. HSBC's is currently at 8%. If you happen to be an HSBC Premier, Bank Account Plus or Passport customer then that's 10% fixed for a year. If you do take the money out before the year is over the interest is lost.
 
I'm by no means an expert, but a well qualified FD friend of mine recently told me that everyone in his office (financial types) have the invested the maximum allowed in premium bonds as it's such a good deal. On average they were getting a 7% ROI, and they could remove their money at any time.
 
Obviously it depends on luck and whether you reinvest the bonds you win for compound interest, but from my experience winnings will average out at 3-4%.
 
Tis true. Payout ratio is 3.8% so on average that's what you'll get unless you win the £1m top prize.

http://www.nsandi.com/products/pb/rates.jsp

Also read an interesting analysis that suggested you're better off saving in a top ISA account and withdrawing the interest each year and buying lottery tickets. Might have been that same Martin Lewis article.
 
I got £100 in premium bonds and won £50 after a couple of months, not expecting any more for a few years now! :p

My mum's had some for many years and not won a penny :)
 
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