Premium bonds? Yes or no...

[Badgerama]

We have just sold a small rental flat we had in Bristol and will be coming out with around £100k. Our mortgage adviser says we should put it into premium bonds as we are likely to win bigger sums of money than if we put it into a savings/investment account. Other options are to halve our mortgage on the house we live in now... (after taking out about £10k for home improvements) or to buy a smaller buy to let nearer us in the midlands. What advice do you all have pls? We are undecided. Thanks 🙏

Average return (tax free) from premium bonds is about 1.25%, but of course this is skewed towards the large prizes. Realistically, you won't be make anything like this.

So mathematically, pay down the mortgage as this is likely to cost more than 1.25%. Don't know what sort of returns you would get on a BTL - if it's more than you pay in mortgage payments, it could be worth the risk of capital erosion if house prices fall.

You might win big on the premium bonds, but could equally, and actually more likely to, come away with less than you would just putting the money in a savings account - the odds of winning very big are actually very small. The more you have, the more likely your prizes are likley to be in line with the average prize rate of about 1.4% ish.

Depending on the interest rate on your mortgage, I would possibly put £30k in PBs, £30k in the best fixed rate savings account I could find and pay £30k off the mortgage, but only if the rate is higher than the 1.5-2% you could get in a cash savings account. If your mortgage rate is much higher than 2%, perhaps put just about all the money in the mortgage (check for penalties) and then use the money saved by not paying a mortgage to then save in cash and PBs.

Perhaps keep another £5-10k in cash over and above the £10k for home improvements if you don't already have this sort of money available, although you can get money back from the PBs fairly quickly should you need it.

I wouldn't do another buy to let going forward, as you will have to pay more stamp duty, but you have previous experience of being a landlord, so will be better placed to decide whether you want to do this again - potential for profitability obviously depends on local prices, rents, demand etc.

I’ve just calculated and I’m getting about the average return on my premium bonds. I live in hope of the big one every month.

My parents have the maximum £100K in Premium bonds and they get a return most months of £25, £50 or £100. They've had bigger wins but for them it's been a better return than having the equivalent in a savings account. Maybe they're winning everyone else's money!

What percentage does their prizes work out annually? If they put £100k into an instant access account paying 1.4%, they'd get £1400 in interest a year, or over £100 every month (obviously they'd have to split the money to not pay tax on the interest).

If they put some of it in fixed rate accounts, they could get over 2% interest pa, and even more if they used regular savers etc, so £1000 per year interest each, or £165 pm on the £100k.

I'm always skeptical about anecdotes about PB winnings, because to pay out the big prizes, most people have to win fewer prizes than they would get based on the average prize fund or in a simple savings account.

To be honest they use it as a place to dump cash as they are maxed out in ISAs and personal saving allowances.

I had £3,000 as I worked out that even winning a £25 prize in one year would be better than the interest rate in a savings account. I won jack shit in two years so got rid of them and paid off some mortgage.

My dad bought £2,000 worth and gets £25 or £50 every four months or so. Bastard.

I must be seriously missing out somewhere along the line. My gran bought some premium bonds for me as a christening present almost 40 years ago, and I've never seen a return on them? Am I supposed to keep checking in on them or do they contact you to let you know you've "won"? I've changed my address on them every time I've moved and everything...

You can check online to see if you've won Grace if you know your premium bond holder's number* .

(*or whatever its called).

Panicatthebistro I have no paperwork about them... but I did an online chat with one of their agents and have written to them to get the numbers/check if I've won anything. Wouldn't that be lovely if there was a huge unclaimed prize just sitting there waiting for me!

What’s your level of risk and what do you want to do long-term with the 100k? Putting it into a pension is potentially the most tax efficient thing if you don’t need the money in the short-term. Premium bonds have a risk over the long-term of not keeping up with inflation so they are no risk free like lots of people suggest. You really need to understand what your aims etc are but a mortgage adviser is unlikely to be the best person to advise on what’s to do with your money. You need an IFA if you want advice not a mortgage adviser.

We bought £5000 about 6 years ago and had a few £25 wins and one £500 win in the first couple of years. Since then not a bean. Read somewhere it’s worth cashing them in and rebuying every so often to generate more wins but can’t see why this would be so. Anyone else heard this?

Dh and I have max amounts of £50K each, and have won a combined £600 over the last 6 months, in £25 winnings (mainly). So not that much different to an easy access savings a/c.
Next month, I'll win the million and it will all be worth it!

Read somewhere it’s worth cashing them in and rebuying every so often to generate more wins but can’t see why this would be so

Crap spouted by people who do not understand randomness, chance, statistics etc.

More new bonds win because there are more of them, as people are rather more likely to have a spare £50k these days than 40 years ago.

We've got about £60k in them, and never win more than £25 a month. Had them for about 3 years. It's been a bit disappointing to be completely honest.

Money Saving Expert is your friend here. They even have a tool that calculates how likely you are to win a big prize (hint: not very likely).

It's worth having a bit of money in bonds, I think, but it not really going to give you a great return. Certainly not a guaranteed one.

Update: Have now won £425 over past 6 months on £50000 invested.
Dp has won £400 in the same time period.
The new Ernie was quite kind to us in March!

Grace, my parents bought some for dd when she was born, 12 years ago, and we've never won a thing, so like you I'm amazed to hear all these tales of monthly prizes!