Told I can’t use this premium bonds money for our house deposit as it’s illegal?

[kiav]

We have two premium bonds accounts. One is in my name and one is in DD’s name. We have 50k in mine and 30k in DD’s.

we are now in a position to buy a home. We will need the 50k for a deposit and we also need the 30k for things like stamp duty, new sofa, to do a small bit of work that needs doing in the downstairs etc.

I have been told by a friend it’s illegal to use Dd’s 30k for this? This is money we have saved from our income but now our circumstances have changed we need it. Surely premium bonds should tell you this before you invest??

Ok, but if that were entirely true the solicitor and/or the building society would have accepted the money as a deposit- they would have no legal right to refuse it.

No, we showed our solicitor where the money was coming from. No issue that its was the kids p b

You absolutely can take that money and use it to buy a house. You control the money in your child‘s account and can use how you see fit as they are a minor. As a good parent who is already planning on securing your child’s future, no doubt you’ll build their savings fund back over time.

we’re planning to do exactly the same with our children’s premium bond accounts when we buy a house soon.

Exactly this, we showed our solicitors that these bonds were in our children’s names and they were absolutely fine with this…. We weren’t hiding anything from them
as this is 100% legal….

You just get strange ‘morally’ righteous people think that a 2 year ( in my case) or a 5 year in the OPs case have full control over this money…. They bloody don’t. We do!!!

It’s fairly baffling that people don’t think having a stable house to live in is in the child’s best interest against a few grand in premium bonds.

Kids living in private rented often end up moving regularly, which impacts on education and therefore their future earnings.

I have a feeling now that people who didn’t think this was legal have suddenly had their eyes opened and now planning to do the same 😂

I don't think this is the concern.

Either it is the parent's money, in which case why is it in premium bonds in the child's name?
Or it us the child's money. In which case the parent has to spend it wisely. In this case perhaps buying the house such that the child has part ownership rather than using the child's contribution for sofas and fees.

However it is clear here the parent really feels it does belong to the parent, and it is the premium bond bit that seems slightly iffy, not the spending.

In the scheme of things it probably doesn't matter much anyway.

The whole tax on savings interest is mind boggling though.

Most of the time in the past 10 years interest rates have been lower than inflation. So you put money into an account, it effectively loses value and you get taxed on that 🤣🤷🏻‍♀️. Fab.

But it doesn’t sound like the OP has enough savings to be taxed anyway and premium bonds is lending to the government not a large private company. So big fat meh.

£20K is the approximate minimum number for savings when most people have to pay tax, so she would have to pay tax on that £30K if she were to put it in a normal savings account.

Hello OP,

There is absolutely nothing illegal whatsoever with what you plan to do and it is a perfectly sound plan and I would say it is a very wise plan. Well done for saving £80,000 and enjoy the purchase of a property that will benefit you, your DD and whoever else lives with you.

Unfortunately, this is a classic example of why you should not share your personal financial information with jealous idiot friends or anyone really it’s got nothing to do with. Now, you’ve gone further and shared it with the whole world of Mumsnet, and unfortunately there’s even more idiots on here, most without premium bonds, or even any money.

If you would’ve just kept your business your business and cracked on doing whatever you planned to do with the house purchase, there will be no issues. As others have already said, you can withdraw your DD’s premium bonds up until her 16th birthday.

Some of the answers you have been given on here are laughable.

I also own premium bonds, I am an ex-mortgage advisor and also I have set up a premium bond account for my DD.

As the legal guardian of your DD, I assume you set up the premium bond account for your DD. If you were the one that set up the account and are the person responsible and have all the passwords and access you are free to withdraw the premium bonds from your DD’s premium bond account to whatever bank account you set up, which I assume is your bank account.

Yes, a mortgage company might ask for proof of deposit, in this case £50,000 of premium bonds in your name will work. Even showing the £30,000 in your daughters account will also be okay, however, if you have any doubts about this, simply withdraw the £30,000 now and get it safely into your bank account. if proof of funds are asked during your application, months and months down the line, you will have the £30,000 in your account in your name showing for several months.

As long as you are the person responsible for your daughters premium bonds, you can do anything you like with them. There is absolutely nothing Illegal about this, this is money that you have saved for your daughter and you have full custody of the funds until she is 16. You have not given your money away at all in this case.

I am sure that a very simple Google search, or a five minute look through the premium bonds terms and conditions will verify this for you and would’ve prevented a lot of doubt and speculation and ridiculous answers from stupid people.

Good luck with your house purchase and I recommend you do not share personal financial information with anyone except people who know what they are talking about and are impartial to your situation. Premium bonds would’ve let you know all you need to know with a simple email or phone call.

Totally wrong!

you’ve no idea!

What are you talking about? You’re embarrassing yourself. Or have you let one of your kids post?

No I’m a financial adviser!

FYI this is how tax on savings works ….

https://www.gov.uk/apply-tax-free-interest-on-savings

bit more complex than “once you’ve got £30k, you’ll probably pay tax”

🤣🤣🤣

My “kids” are 32 and 30, they’d post more sense than you!

You pay tax on your income. You have tax threshold for your income where if you earn below that amount (I think it’s a little bit over £10k a year), you don’t pay tax. Anything you earn over that threshold is taxed. Any savings you make from your income are yours to save however you like in a number of totally legal options. Under your mattress counts. You don’t pay tax on savings - you’ve already paid any tax due on the income.

What you do pay tax on is any interest earned on on your savings. So, if you saved £30k and earned let’s say £300 on that, the £300 interest is treated as income, added to your income from the year and is taxed according. To be really clear, only the interest will be taxed. This is where it gets interesting with premium bonds. You don’t earn interest on premium bonds. You get winnings. You can imagine them as raffle tickets. You might win absolutely nothing, you might win a nice amount. You might get more money from putting the money in a savings account but hey, you could win really big with premium bonds and some people want to take that chance. But as the return from them is legally classified as winnings, you legally don’t pay tax on the winnings. It is not a tax dodge. It’s an alternative to keeping it under your mattress (which is also legal and not a tax dodge).

Regarding the premium bonds being in a child’s name. The law allows this. You can chose to invest up to £50k in premium bonds on the child’s behalf but as a parent, you manage that money. The t&cs grant total control of that money to the parent. Only the parent can withdraw it. The point when it formal moves into the control of the child is when they hit 16. This is good for parents because there might be many times before they child hits 16 that they might decide £30k would be much better used in any number of ways rather than handing it over to the child. If you want to make it totally your child’s money from day one, do a junior ISA.

There are no legal or moral qualms with what the OP is doing. The issue for people appears to be either misunderstandings about tax abd premium bonds, or their personal conscience where they would struggle to take back what they feel they have “given” to their child. Perhaps it would be more helpful to view money in premium bonds in a child’s name as an “allocation”, as that can be adjusted as required. But either way, the question was about legality and the OP is fine to crack on.

Thank you ! Very eloquently written… and exactly so…. It’s all very much legal and the OP should be very happy she can crack on to make that house purchase!

Hope you’ve found this thread educational :)

What threshold do you mean?
It's totally fair if that's your opinion and if it's something you wouldn't do but I don't see from what perspective you are talking about thresholds in the eyes of the law.
If it is opinion, then mine is that it's better and more secure that DD lives in a house her parents own and all being well at some point she might inherit, than continue in rented accommodation, and hand her her own money when she is 18. There's every chance OP will be able to replace the savings before then anyway.

I’ve been thinking about what an odd/unique product premium bonds are… Apologies for the rambling nature but here we go.

As I’m starting to understand it, everybody, including children, are able to win prizes if they invest money in the scheme, for as long as their money is in the scheme. Children being children obviously can’t just crack on themselves, but they still have an allocation within the scheme. Someone can else use their allocation.

The controls must be on who is allowed to use their allocation. That person decides how much to tie up in this scheme and for how long. Perhaps they will get fed up of not winning anything and decide to try a more traditional savings account. But the person who has access to the winnings must be someone who has responsibility for the child, right? Dave from the corner shop shouldn’t be able to use your child’s allocation of premium bonds to win for himself. Considering the feature of child premium bonds exists, it’s very reasonable that a parent can use the allocation. Is it reasonable for a grandparent to use that allocation…? Well, that’s going to depend on a number of factors. Will it benefit the child? If they are going to keep the winnings and take back all the capital then no. But if they gave the child the winnings, but took back the capital out of the scheme after a period of time, then yes…? It how can you enforce that? What if you want to invest your own money and control the use of the winnings but granny’s maxed your child’s allowance for their benefit? I assume therefore that there are strict controls on who is allowed to apply on behalf of the child.

I guess what I’m getting at is it will be hard to argue the money is completely the child’s if they are under 16. They only have an allocation of premium bonds that can be purchased, and this must controlled by an adult. That adult must be allowed to take the money out if they feel they want a more stable return on their capital, as relying on winnings may no longer be the best option. This isn’t about “giving” money to a child. It is about using their allocation of premium bonds. You will only end up actually giving that money to the child if you leave it in there beyond their 16th birthday.

Why didn't the OP's solicitor accept the money then? I'm assuming their solicitor is fully aware of the legal position, so why is there a problem then?

I think the issue might be that this is winnings not savings- are the winnings tax free? Because the answer is not necessarily it would explain why the OP's solicitor won't accept the money, I find it hard to believe Mumsnet posters are more aware of the legal position than the OP's solicitor.

Well that's as maybe but I bought a house this year and moved money from premium bond accounts into my funds to transfer for the house purchase and Lloyds didn't seem to give a shit where the money came from -they had access to my accounts and could see that I had moved premium bond money about. No questions were asked at all as to whose accounts I had accessed the money from!

The OP's solicitor hasn't said they won't accept the money. You've just made that up.

@UnimpressiveUsername Only a parent/guardian can open a child's premium bond account, but anybody can pay into it.

The parent/guardian that opened the account has full control of the child's account and can withdraw the money into their account.

That does raise questions regarding whether a parent should be able to withdraw money that grandparents have gifted to a child

@ThisOldThang thank you!