Premium bonds v ISA?

[oldwheels]

I use PB’s as I reckon to get a better return then an ISA which was virtually nothing. The other consideration is I can get at the cash if required almost immediately. After reading the small print carefully on most other products I was not impressed.

 

[ColinJ]

My sister has the maximum holding (£50,000). In theory that should produce about 23 wins a year. I think she had a couple in January and February, and she won 5 times in the March draw (all small wins, mostly £25 prizes).

I bought a lot of bonds with the money that I inherited from my parents and best mate, but I am having to cash them in month by month now to pay my household bills.

I would definitely buy the maximum holding if one of my hare-brained schemes ever actually bore sufficient fruit.

 

[wonderloaf]

It's simple - you start a SIPP or something similar. Anything you contribute is eligible for tax relief at 20% gross - so if you invest £500 then that is regarded as net (80%) and the government then adds on the "tax relief" to the amount invested (£125) so you get £625 sitting in your account.

You can then withdraw this at any time after 55 - the only rule being that 25% of any amounts taken are tax free and the remainder is added to the rest of your income for that year. But if the rest of your income plus the amount taxable are less than £11,000 (personal allowance) then the whole of the amount taken escapes tax.

You just need to ensure that the amounts are invested in "safe" investments like government bonds and that whatever Pension provider you choose doesn't charge too much!

Pension put in 12k net for every year you want to retire early. Each year you are retired before state age withdraw approx 16k tax free if no other earnings. With a modest return should be a few quid left over. Both you and wife do same £32k a year tax free ample to live the good life.

Cheers guys, this has given me something to think about, think I need to sit down, take on board what you've said and do some maths , finance isn't my strongpoint though!

 

[biggs682]

It's simple - you start a SIPP or something similar. Anything you contribute is eligible for tax relief at 20% gross - so if you invest £500 then that is regarded as net (80%) and the government then adds on the "tax relief" to the amount invested (£125) so you get £625 sitting in your account.

You can then withdraw this at any time after 55 - the only rule being that 25% of any amounts taken are tax free and the remainder is added to the rest of your income for that year. But if the rest of your income plus the amount taxable are less than £11,000 (personal allowance) then the whole of the amount taken escapes tax.

You just need to ensure that the amounts are invested in "safe" investments like government bonds and that whatever Pension provider you choose doesn't charge too much!

Never even heard of a sipp but will be looking at it soon in better detail soon

 

[PK99]

My sister has the maximum holding (£50,000). In theory that should produce about 23 wins a year. .

A long time ago we used to have the maximum, and the return was pretty good most years - every month a few envelopes dropped through the door IIRC never more than £100.

We cashed them in when GB's budget sneaked in a stealth tax in an under the line item in one of his budgets. Prior to the change, the Prize fund was based directly on one of the National savings interest rates and tax-free in the hands of the winner After the change the prize fund was based on one of the NS rates less an amount representing the average tax take across income taxpayers. So, while the winnings were still tax-free in the hands of the winner, the winning probability was less. We noticed the difference -the $40k went into PEPS and eventually became ISAs


With £50,000

Winnings Probability
£0 Exactly 1 in 43,251,547,540
At least £25 Virtual certainty
At least £50 Virtual certainty
At least £75 Virtual certainty
At least £100 Virtual certainty
At least £150 Virtual certainty
At least £175 Virtual certainty
At least £200 Virtual certainty
At least £250 Virtual certainty
At least £350 99.3%
At least £400 97.7%
At least £450 93.9%
At least £500 87%
At least £750 24.7%
At least £1,000 5.63%
At least £1,500 1.44%
At least £2,500 1 in 675
At least £5,000 1 in 723
At least £10,000 1 in 1,556
At least £25,000 1 in 3,678
At least £50,000 1 in 8,080
At least £100,000 1 in 17,276
At least £1,000,000 1 in 59,822
https://www.moneysavingexpert.com/savings/premium-bonds-calculator/#result

 

[screenman]

I have not had a single win on the premium bonds in the 51 years that I have owned them.

 

[ColinJ]

I have not had a single win on the premium bonds in the 51 years that I have owned them.

What - neither of them has ever won - blimey, bad luck!

 

[snorri]

I have not had a single win on the premium bonds in the 51 years that I have owned them.

That is amazingly bad luck.
It's time to cut your losses, cash them in and getaway on a Round the World cruise or some such extravagance with the takings.

 

[screenman]

What - neither of them has ever won - blimey, bad luck!

How did you know?

 

[ColinJ]

How did you know?

I assumed that it must be a very small number otherwise you would have probably won at least once, and the number couldn't be 1 because it was 'them' rather than 'it' so I took a guess at 2!

ColinJ, aka 'Sherlock'

 

[Beebo]

There was a scam a few years ago where you bought the maximum limit, then sold them all except the first and last one.
These numbers could not be resold, so you only had £2 of bonds across a huge range.
The ERNIE couldn’t account for the missing numbers so if they were selected by the computer it moved to the nearest actual number.
The loop hole was swiftly closed.

 

[DaveReading]

There was a scam a few years ago where you bought the maximum limit, then sold them all except the first and last one.
These numbers could not be resold, so you only had £2 of bonds across a huge range.
The ERNIE couldn’t account for the missing numbers so if they were selected by the computer it moved to the nearest actual number.
The loop hole was swiftly closed.

That sounds like an urban myth. Either that, or some incredibly sloppy prograamming.

 

[PaulSB]

As interests rates are so low at the moment I was thinking of using some savings I've got in a cash ISA to buy some premium bonds, pros / cons?

We retired 12 months ago. In the years leading up to this we saved like fury, basically one full time salary every month, on top of pensions etc. We currently have £100,000 in PBS and have had for a while - all the savings went there. We consistently beat an ISA winning an average of £150/month.
I know it’s luck. I also enjoy the anticipation each month of the big one. Sad I know.

If you are considering retirement there is a lot to consider and I would think about pensions as well. You’re FA will help. We did not add to the pension fund as five or six years before retirement I knew I had a large enough pot. I had an opportunity to “protect”the pot and receive a guaranteed 4.5% pa. It meant I couldn’t easily add to my pot though.

One place I’ve put money from my lump sum is Prufund. I’m happy with it.

Living off savings till pensions kick in is OK. We do it and have several friends who do. A good FA will provide an illustration/projection on this up to whatever age you wish - I plumped for 95!! We combine taking maximum income below the tax free amount with spending savings if necessary - it usually isn’t.

BTW - retirement living costs are not as high as working. This really surprised me, working is expensive.

 

[Beebo]

BTW - retirement living costs are not as high as working. This really surprised me, working is expensive.

I’ll tell you what is expensive, bloody kids!
I was chatting to my retired Dad and realised how frugal you can live once the mortgage is paid off and the kids are gone. We could quite easily save £2000 per month without a mortgage or kids!

 

[Levo-Lon]

PB's for me.
i get £25 regularly as does the wife.
my daughter has won a grand twice in 2 years..