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AIBU?

Share your dilemmas and get honest opinions from other Mumsnetters.

Original poster

To ask if premium bonds are better than a cash ISA?

97 replies

Wondering001 · 10/07/2021 21:20

My savings have been sat in a cash ISA earning f all interest really over the past couple of years.

I've been looking into premium bonds, does anyone know if it'll be worth while using all my savings to buy premium bonds instead?

Do you have any? Have you ever won anything? Do you have hundreds of premium bonds or thousands?

I saw on the website there's a 1 in 34500 chance of winning £25 each month. Does this mean if someone was to have £34500 worth of premium bonds they'd be likely to win £25 fairly often or am I being dense?

Cheers

OP posts:
Essentialironingwater · 10/07/2021 21:24

Better than cash ISA, yes, not nearly as good as a low cost stocks and shares ISA (if you don't need the money for at least 5 years)

Olny · 10/07/2021 21:31

If you had £34,500 you would win £25 fairly often yes.

AlwaysLatte · 10/07/2021 21:31

I'd be inclined to use up your ISA allowance first each year then invest the rest. Over the last few years we've been getting around 6% return on investments which we're happy with. I did just put a very small amount (£1k) into premium bonds for fun but I don't really expect to get anything (better odds than the lottery, though!)

ElderMillennial · 10/07/2021 21:33

I have some.

The interest rates are so low even for ISA so IMO it is worth going for PBs but it is a gamble as you could win a lot, you could get equivalent to what you'd get with an ISA or you could not win.

I got mine in feb (£10000) and won £25 the first month. Haven't won anything since.

Original poster
Wondering001 · 10/07/2021 21:35

@AlwaysLatte
Can I ask why you think using the ISA allowance is better? My cash ISA has 0.1% AER so not really getting anything out of it.

@Essentialironingwater
If all goes to plan I will need the money in the next 2-3 years so unfortunately I don't think a stocks and shares ISA is a good idea for me

OP posts:
EmmaC78 · 10/07/2021 21:36

I have a cash ISA but was getting so little back that I transferred £3000 to premium bonds a few months ago. I didn't win anything the first month but got £25 last month. Even if I just win a couple of times a year it seems like a better return than the ISA.

MikeHat · 10/07/2021 21:36

I get something every month from mine, maximum holding. I wouldn't use it as first choice. As pp said a low cost stocks and shares ISA is better.

WaterBottle123 · 10/07/2021 21:37

Definitely get a stocks and shares ISA. Mine has made ten percent in 8 months

Rubytinsleslippers · 10/07/2021 21:37

I've had premium bonds for 40 years and never won. I phoned to check they were still valid recently as beginning to wonder...

SnarkyBag · 10/07/2021 21:37

I have 38K in premium bonds and win £25 most months occasionally £50 or £75 (maybe twice a year)

OublietteBravo · 10/07/2021 21:38

I have (almost) the maximum amount of premium bonds. I’ve won £225 so far in 2021. I can’t reliably comment on whether this a better rate of return than a cash ISA as I don’t have one. My rate of return on my S&S ISA is better, but I see that as a longer term investment than premium bonds.

Original poster
Wondering001 · 10/07/2021 21:38

Is a stocks and shares ISA good for money you need in about 2 years? I always thought they were too risky unless you were looking to invest in them long term?

OP posts:
Myneighboursnorlax · 10/07/2021 21:38

I have about 20,000 in premium bonds. So far this year I’ve won around £300.

clary · 10/07/2021 21:41

I have the max in PBs and have won £400 over the last 10 months, so that's a much better return than the stupid deposit account the money was in.

I have an ISA as well. PBs are fun - each month you think , oooh I might win! The most I have won was £75 a couple of times (including this week :D)

HirplesWithHaggis · 10/07/2021 21:41

My mum has maximum holding, wins most months, usually £25 but quite often more. (I don't know how much it was, but one December win paid for her birthday lunch with three daughters, two sons in law, and three grandchildren, all adult appetites.)

DroopyClematis · 10/07/2021 21:47

Two family members have maximum holdings and have won much more than any interest rate going.

swampytiggaa · 10/07/2021 21:48

I don’t have loads in premium bonds - about 4K currently but it has been less. I seem to average winning £50 a year which suits me.

I use it as a savings account that takes a bit more effort to get the money out of that makes sense. The winnings are a bonus. I’d like to save a year’s salary in there tbh (I work part time in retail so not loads) as a cushion.

ErrolTheDragon · 10/07/2021 21:59

@Wondering001

Is a stocks and shares ISA good for money you need in about 2 years? I always thought they were too risky unless you were looking to invest in them long term?
Two years is a bit short for stocks & shares tbh. The problem with cash ISAs is that the bloody banks essentially pay really crap interest rates because people will still get them because of them being tax free and if you don't use your allowance for the year you lose it.
Lincslady53 · 10/07/2021 22:00

We transferred our cash is as into a Vanguard stocks and shares is a at the start of this year. In 6 months the value has grown by 5% . We are aware that there is some risk of the value dropping, but we have selected one of the lower risk options and so far we are pleased. You can transfer a cash is a and keep the profits tax free. We also have a large lump in premium bonds. Best win we have had has been £300. This month, £25. Overall premium bonds have returned just under 1% over the last year. We will be transferring some of the premium bonds to Stocks and Shares isas. There is also the much trumpeted green bond from National Savings due out in the next few weeks, but the interest is not likely to be over 1% and it will be taxable.

MereDintofPandiculation · 10/07/2021 22:07

The point about an ISA is that once you’ve taken it out, you can’t put it back in. So if interest rates go up, which they may do, you can’t put all your savings back into an ISA, only an amount equivalent to the annual ISA allowance.

takemehometoasda · 10/07/2021 22:26

If you're not happy to potentially lose money then a stocks & shares ISA is not for you.

The ISA allowance is £20k a year. Slightly bemused by the suggestion to use all of that and then put the rest of your annual savings elsewhere - surely most people aren't in a position to add in excess of £20k each year to savings?

As for PBs, I have £250 and I've won £25 in five years. I basically bought them instead of lottery tickets because at least with PBs I still have my original cash at the end even if I don't win!

I can't remember what the process is for liquidating the bonds but I seem to recall reading over the last year or so that some people had been caught out by being unable to get their money back fast enough when they needed it?

I think statistically the more you have the more likely you are to win, but those 1 in 34500 odds apply to each £1 separately so you can still end up with nothing. It's random, they don't count along 34500 bonds and then hand out the prize at each cumulative total. Every single one of your bonds could still be on the side of 34499 in 34500 that don't win.

Same as if you bought 100 raffle tickets out of say 5000 rather than just buying 1 ticket - you'd have more chances to win and have the possibility of being drawn more than once if luck was on your side, but equally you could still end up with nothing if none of your tickets were drawn.

entropynow · 10/07/2021 22:26

@SnarkyBag

I have 38K in premium bonds and win £25 most months occasionally £50 or £75 (maybe twice a year)
I have about 50K in an income trust and get over £3000 a year.
WaterBottle123 · 10/07/2021 23:32

@Wondering001

Is a stocks and shares ISA good for money you need in about 2 years? I always thought they were too risky unless you were looking to invest in them long term?
Well yes and no. Most years a decent stocks and shares ISA grows 5-10 percent. But if you get a bad year you'd then need to leave it in longer to recover.
Hereward1332 · 10/07/2021 23:53

Premium bonds have an implied a rate of 1%, which on the face of it it is probably better than most cash ISAs. However you are not likely to receive 1% - the fund is skewed because of the very few million-pound prizes. Mathematically they are a good option but in real life if you need the capital guaranteed a cash ISA is the safer option. But no chance of the big bucks.

Daisychaincarrot · 10/07/2021 23:57

Google Katy kicker premium bond. She’s got the full £50k allowance and posts about how much her monthly wins are.

I would choose a stocks and shares ISA over premium bonds any day. One year in and I’m £100 up for every £1,000 in it