AIBU -50k - NS&I

[JessicaRabbit23]

AIBU to put £50k each into a premium bonds account for my 3 kids whilst I wait for August to pay my mortgage off so I don’t get charged fees? Not sure if it’s morally wrong or not.

What interest? None paid on premium bonds

And how would they even know about it?

You could put that £150k into a savings account and earn 4.5% on that for five months. Even if you pay tax on it that is likely to be better than the "winnings" on your lottery ticket (aka premium bond)

Yes it’s fraud if you’re pretending the money is theirs when it’s actually yours, in order to benefit from the additional allowance. It’s also potentially an AML breach.

It’s also completely pointless as you are likely to make more in cash ISAs and instant access savings in your own name.

If you owe someone money and don't pay it, there's interest to pay, regardless of whether you actually gained interest yourself.

And I've no idea but there's a lot of advances over the years, there's a good chance anyone can do a request for historical account details.

Look at the advances in ai and DNA and all the rest, there's every chance financial data would be more easily accessible in future

But she would have done nothing wrong!

Agree - if she outs them in a PB she earns no interest anyway so it would just be the issue of any winnings (unlikely) whereas even if she has to pay interest on the interest earned on the £150000, she’s still be better off. Plus it’s not fraud.

@PhilosophicalCheeseSandwich if you transfer/extend your existing mortgage on a new property (ie if it is portable) you might not need to pay it off and incur the penalty anyway. Have you spoken to your mortgage provider to check? We have an offset mortgage (so savings reduce the interest due and thus the monthly payment) and it is fully portable to another property. Perhaps speak to your lender and see if they will waive/reduce the penalty charge if you remain with them but switch to a new product?

The tax saving could be a few hundred pounds depending on the individual circumstances. At a 4% annual rate, £150,000 earns £2,000 interest over 4 months. A higher-rate taxpayer has a personal saving allowance of £500 so that leaves £1,500 taxable. At 40% tax, you pay £600. So it’s not necessarily just a few pounds.

But you would still be up wouldn't you?

@limeandwateryes I’m suggesting OP should put it in normal savings and pay any tax due.

But she doesn't legally have to do that.

When she pays off her mortgage the mortgage provider will want to know where the lump sum came from.

And she can honestly tell them.

Why not just invest it yourself? Put it in an easy access accounts at the highest rates you can find. Legally you can't gift money even to your children and then take it back, that's stealing, so a bit more than morally wrong.

No it isn't!

I use PB for short term deposits if large amounts regularly - the returns are shite but you might just win the big one.

Yes, I agree if OP puts the £150k in an account in her name that pays no interest, there is no interest to tax.

I think it's properly better if OP keeps the money in an account in her name, interest paying or not, - rather than tries to open accounts in her children's names whilst knowing it's purpose of to pay off the mortgage.

If you put the money in today it couldn't win until the 1May draw, that's 6 weeks of no interest. If you take money out late in the month, you will lose out then too. But there's a small chance you could beat the interest earned by a considerable margin.

The amount of interest earned would depend on the rate and how much you would be taxed, which would depend on what you earn and what other savings you have.

But its perfectly legal to buy PBs for your DC and its probably not illegal to 'forget' to tell them you've done it, then change your mind about the gift in a few months time, so they won't know to object when you cash in the bonds.

What kind of stupid would you have to be to keep £150k in an account that pays no interest (or has a chance of winning PB prizes)?

If one child wins a lot that is going to cause a lot of problems. It will be their money, not yours or their siblings

There is no way that will be policed.

Why not?

'Yes, you can buy NS&I Premium Bonds for children under 16, allowing them to enter monthly draws for tax-free prizes ranging from £25 to £1 million. Anyone can purchase them, but a parent or guardian must be nominated to manage the account until the child turns 16. The minimum investment is £25, with a maximum of £50,000.'

The bonds belong to the child and you can't just take the money back. Well you physically can take it back by paying it into your own account, but really dodgy to do that.

It's not dodgy at all.

All you need to do is show it was in the "child's best interest."

Paying off your mortgage so you children can enjoyer a better quality of life would fall into that category.

OP what's your mortgage rate? It might be worth leaving the overpayment until all your ERCs have expired.

The child might not agree when they are adults and find out they had £50K that just disappeared out of their account.

They don't need to agree.