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

[Wondering001]

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

If you need the money in 2 years, I'd just go with Premium Bonds. DS has put a few hundred he will need shortly for driving lessons and he's won £25 the first month, which is much, much more than he was getting.

@applecharlotte12

I’ve had £16k in PB for a year and won nothing ☹️

With that amount it's pretty much 50/50 each draw. £16k for a year it's similar odds as tossing a coin in a game of 'heads you win, tails you lose' 10-12 times and never getting heads.

Statistically fairly unlikely but not impossible.

I had £10k in PBs and won prizes more than 50% of the time. Over the year I had them, I won £350.

Then I cashed them in and used the money to pay off the mortgage.

I have £50K in premium bonds (it's part of a house deposit but buying a house has dragged on so long due to COVID so it's been there a long time now). I win usually between £25-100 every month. I'm pretty sure it's earned me more than the much larger chunk of money I have sitting in savings.

Premium bonds are more fun, you can get an app where you count down to reveal results day each month and when you click it has a little joyful or sad photo. It brings me joy!! Whether the interest is better I have no idea!
Do half, half?

@BarbaraofSeville gosh now I do feel unlucky when you put it like that! I’ll prob give it another 6 months and if I’ve still not won anything research other options.

I wondered this, ISA pays 0.75% but can't access for 18 months, savings pays 0.5 %, I use the savings though for large things as I can access 3 times a year, is it easy to cash in PBs to use like an access savings account or are you meant to buy and leave them in as long term savings

This is all great advice. Thanks everyone!

I wonder if the interest rate is likely to go up soon when the economy recovers somewhat from covid.

What do people recommend in terms of stocks and shares isa versus paying into a pension which invests in stocks and shares? I get that you then can't access pension for a long time however you get a chunk of free money from the government as well as whatever return the stocks and shares give out. Is that then better for someone who wants to invest for the long term? Short term i feel like stocks and shares are risky hence my question. I may be being nieve but am thinking paying into pension fund will reduce my tax plus give me free money and also give me the benefit of investing in stocks and shares?

@Newmumatlast - saving for a pension is usually a better option. Because of the tax savings and - for occupational pension schemes - the employer contribution.

However, there is a limit to how much tax relief you get on pension contributions. And when you draw your pension you may be paying tax on it (assuming your income at the time is above your personal allowance).

For a S&S ISA you are paying into it using taxed income, but you shouldn’t be paying tax when you access the money.

TLDR: the money in an ISA is taxed on the way, the money in a pension is taxed on the way out.

Op, simpler path to wealth, jl Collins

I know you said you need the savings soon ish but as a point, my interest has been between 20% and 32% and that's including lock down.
Same for dc stocks and shares isa.

Perhaps put a little into stock and shares to get a feel for it because had you done so when you first invested into a cash isa you'd be a good few grand up by now.
One of mine has done amazingly well but that is because of one fund mainly however...generally a few index funds, probably with vanguard which is the john Lewis of the investing world is the way to go. Simples.

Obv interest is very low at the moment

So yes put all in premium bonds - you may win a million, few hundred k or £25 or nothing

But it’s the thrill of it

I do a premium bond thread, will go find and link here in case you or others join

@Newmumatlast

Short break down of jl colins is : a fund, index fund that replicates the American stock market means you are investing in hugely productive, dynamic and profitable companies, probably world beating.. Imagine what they have to do to get tyere.

It's also a self cleaning fund because if a company does start to fail, it simply drops out of the fund.
So how can your money fail, yes there are down turns but never for long the market always rises because behind the market are dynamic, money generating companies who want to succeed and when they start to fail zthey drop out and are replaced by... Dynamic achieving companies.

Only literally a massive world collapse would stop such a market like a nuclear war.

It's better than choosing individual stocks and as a point I think only one company is still in the index since it started which is why its better to to buy the whole thing.

Jack bogle, why look for a needle in a haystack when you can buy the whole hay stack

premium bond thread

• op yes, pb are far better than a cash isa but a s and s isa is far better than both.

I keep money in pb, but only as fairly quick to access cash... I've won 75 in about a year
V at least 1500 in s and s isa

I have a combination of a HTB cash ISA, Premium Bonds, and S&S ISAs.

The interest on the HTB cash ISA is higher than I would get elsewhere (although still not overly generous), however up to £12k I'll get a 25% bonus if I use it to buy a house, so potentially up to £3k 'free' from the government. I keep this one as it does generate a little interest, I'll get the bonus, and if I'm strapped for cash I can access this instantly. However, you can only put in £200 per calendar month, so I try not to touch it unless I need to.

Premium Bonds are about as safe as you can get, however they're unlikely to do anything spectacular for you. Pros include low risk, easy access to your savings if you need (although they take about 3-5 days to pay you when you withdraw) and you can now invest as little as £25 at a time (it used to be minimum £100). So now I have a £25 DD every week. Con is obviously very little returns in most cases. I've won £25 about 5 times over the last 3 years, with a few thousand held.

My S&S ISAs I've held for short - medium term and include a regular ISA and a LISA. I'm comfortable choosing my own investments and I keep an eye on them. I get the best return on these, but I won't be holding them for too long as I'll be cashing them in next year, all being well.

You can absolutely hold S&Ss in the short term as well, however the pros of increased returns is balanced by the cons of the risk that your capital will shrink if the markets suffer. You can mitigate this risk by diversifying your portfolio geographically and across industries, and keep a good mix of bonds, equities, and alternatives.

S&S portfolios are certainly best when held over the long term, but I wouldn't say they're a bad idea in the short term as long as you're taking lower risks (if you want to save for 6 months time I wouldn't chuck everything I have in a highly volatile global equities portfolio, for example - go for bonds, index trackers etc).

@Newmumatlast

What do people recommend in terms of stocks and shares isa versus paying into a pension which invests in stocks and shares? I get that you then can't access pension for a long time however you get a chunk of free money from the government as well as whatever return the stocks and shares give out. Is that then better for someone who wants to invest for the long term? Short term i feel like stocks and shares are risky hence my question. I may be being nieve but am thinking paying into pension fund will reduce my tax plus give me free money and also give me the benefit of investing in stocks and shares?

I think once you hit the higher tax it’s better to invest in your pension, as otherwise you’ll pay 40% on it before investing yourself.

Probably a tricky one before that. Depends on if you think you can invest it better than your pension fund can.

All my stocks are pretty high at the moment so I would be worried I was buying at a peak if I needed the money in a short period of time. I would go for PBs in your situation!

I've got £50k in PB I used to get a 'prize' of £25/£50/£75 most months but seems to have dried.
My £50k is a temporary investment so I can't be bothered to move it but there must be better options out there?

@lotsofchooksnducks

I've got £50k in PB I used to get a 'prize' of £25/£50/£75 most months but seems to have dried. My £50k is a temporary investment so I can't be bothered to move it but there must be better options out there?

Honestly if it's temporary I'd leave it where it is.

You're well over the £20k annual allowance to move it all into an ISA, so for tax purposes you'd need to leave at least £30k in PBs in any event, unless of course you want to expose yourself to tax!

Putting £20k into a cash ISA might be worth doing, depending on how long you need to hold it for and what interest rates you can get. But if you're wining PB prizes regularly, you're probably already beating the market on that front tbh so you may be worse off with the interest.

I probably wouldn't put it into an S&S ISA now, as you'll be charged some fees on £20k of investments, and it doesn't sound like you'd be holding it for long enough for it to grow substantially.

@entropynow where on earth are you getting 6% interest?!

If you're really risk-averse, maybe do Premium Bonds and also have savings account in the banks which are doing monthly draws for their savers?
Off the top of my head: Halifax (min £5k balance, £100k top prize), Nationwide (min £1 balance, £100k top prize)
There may be others as it's a way for them to tempt customers in while interest rates are pretty much nil.

But, to echo PP, you'll get more growth if you take a bit more (educated) risk

Financial adviser friend suggests PBs as you can access the money if you need to. Family has 5-20K's worth each and a couple of us win at least £25 each month. Good return if you don't want to lock away money or take risks.

I've got 50K in premium bonds and didn't win anything this month - which is very unusual
Last month I won £125 - I've had them for 3 or 4 years and usually win £25 or £75

I love my Premium Bonds. Don’t make as much as my Fidelity investments but they are safe and I win most months.