Premium bonds v ISA?

[Dave Davenport]

As interests rates are so low at the moment I was thinking of using some savings I've got in a cash ISA to buy some premium bonds, pros / cons?

 

[winjim]

When we got our mortgage last year our financial advisor said premium bonds were giving a better return than ISAs at the moment. That's where she recommended we keep our spare cash.

 

[perplexed]

An advantage of the isa is that even with poor rates, it might be worth 'bagging' your allowance for the year. Then as and when rates improve you can transfer this year's allowance to a better performing one in the future. Usually. I like bonds too tho'... I'm not a financial advisor, jus chucking a thought out there

 

[Paulus]

With premium bonds, your money is always there and any winnings will be tax free. So if you balance the potential winnings against interest rates it may well be better. But because of inflation, ultimately your stake in NS&I will diminish by that rate.
I have money invested in bonds for a year now, and at the moment I am up on any interest that ISA's can pay.

 

[vickster]

I tend to get £25-50 a month from PBS (15k in maybe?), my cash ISA basically gives me nothing. My low risk shares ISA is flying at around 7% growth IIRC but depends on whether you are prepared to accept risk...I recently shifted cash into that from the cash ISA

 

[accountantpete]

Chuck it in a pension.

Instant 24% return together with selecting a safe type of investment should provide security and increase in wealth - but you need to take a year or two off just before retirement to make it pay.

 

[wonderloaf]

Chuck it in a pension.

Instant 24% return together with selecting a safe type of investment should provide security and increase in wealth - but you need to take a year or two off just before retirement to make it pay.

Tell me more .... I'm at a point where I'm trying to decide if I can afford to retire or not, my retirement isn't due for another for a few years but I may have just enough savings to see me over until the pensions kick in. Got the financial advisor coming round next week as well so would be good to go into the meeting with some cards up my sleeve!

 

[accountantpete]

Tell me more .... I'm at a point where I'm trying to decide if I can afford to retire or not, my retirement isn't due for another for a few years but I may have just enough savings to see me over until the pensions kick in. Got the financial advisor coming round next week as well so would be good to go into the meeting with some cards up my sleeve!

It's simple - you start a SIPP or something similar. Anything you contribute is eligible for tax relief at 20% gross - so if you invest £500 then that is regarded as net (80%) and the government then adds on the "tax relief" to the amount invested (£125) so you get £625 sitting in your account.

You can then withdraw this at any time after 55 - the only rule being that 25% of any amounts taken are tax free and the remainder is added to the rest of your income for that year. But if the rest of your income plus the amount taxable are less than £11,000 (personal allowance) then the whole of the amount taken escapes tax.

You just need to ensure that the amounts are invested in "safe" investments like government bonds and that whatever Pension provider you choose doesn't charge too much!

 

[User269]

I tend to get £25-50 a month from PBS (15k in maybe?), my cash ISA basically gives me nothing. My low risk shares ISA is flying at around 7% growth IIRC but depends on whether you are prepared to accept risk...I recently shifted cash into that from the cash ISA

According to moneysavingexpert premium bond calculator;

The Key Result
You are lucky - only 7.05% of people who have put £15000 in premium bonds over 1 year win more than £300.

According to me;

Even a crummy .75% cash ISA will earn you a guaranteed £112.50pa on a £15k investment.

 

[Dave Davenport]

I'm going to go for £10k in PB's as I'd rather have the chance (ok, slim chance) off winning a few grand than the 100 quid or so I'm getting in annual interest. I'll have enough annual allowance left to stick it back in an ISA if the rates improve any time.

 

[Dave Davenport]

Re. the pension idea; I've got a pension running (and a final salary one in the PPF), this is savings I'd like access to if needed.

 

[User269]

I'm going to go for £10k in PB's as I'd rather have the chance (ok, slim chance) off winning a few grand than the 100 quid or so I'm getting in annual interest. I'll have enough annual allowance left to stick it back in an ISA if the rates improve any time.

The Key Result
With £10,000 in Premium Bonds, if you have average luck
you would expect to win roughly £100 over 1 year

 

[vickster]

According to moneysavingexpert premium bond calculator;

The Key Result
You are lucky - only 7.05% of people who have put £15000 in premium bonds over 1 year win more than £300.

According to me;

Even a crummy .75% cash ISA will earn you a guaranteed £112.50pa on a £15k investment.

No 7% on shares ISA not PBS.

 

[oldfatfool]

Pension put in 12k net for every year you want to retire early. Each year you are retired before state age withdraw approx 16k tax free if no other earnings. With a modest return should be a few quid left over. Both you and wife do same £32k a year tax free ample to live the good life.

 

[PK99]

I'm going to go for £10k in PB's as I'd rather have the chance (ok, slim chance) off winning a few grand than the 100 quid or so I'm getting in annual interest. I'll have enough annual allowance left to stick it back in an ISA if the rates improve any time.

check out other national savings products:

https://www.nsandi.com/interest-rates