This video is the first in a new series where each month we will examine whether popular ways to save and invest actually live up to their promises. Please drop your suggestions below for what else you want me to cover.
Great video. I'd be interested in a look at investing in classic cars and similar depreciating assets that people convince themselves are a good investment.
I've my emergency fund in premium bonds. I find it handy as I'm not tempted to spend it as its out of my current account. Also i do it instead of the lottery for a small bit of excitement in an otherwise rather dull existence 😂
That's EXACTLY how I view mine! As an emergency fund, that's safe, and not easy to spend, and can win you money! I won in November, December, January, and March! A tidy sum too!
It's highly liquid (withdraw when needed), risk-free (guarantee capital preservation) and tax-free, with high potential upside (albeit low chance). Certainly has its unique place and value amongst the heavily-taxed British. As you said, it's a tax-free shelter for the people (especially those who can't afford to hire accountants to setup companies/FICs to dodge tax), so it's doing good for the public
Agree with everything you’ve said, apart from it being risk free. The very real risk is that you don’t win anything, and are losing out on gains elsewhere. Let’s take the average £5k investment and the 5% return that Damien mentioned. Investing £5k after 20 years at 5% you end up with £13.5k - a gain of £8.5k. If you put your money into Premium Bonds and don’t win anything you still only have your original £5k - which every year is losing buying power because of inflation - especially these days. It is not risk free at all. Your risk is an £8.5k loss And that’s at a low 5% rate. Investing in the S&P 500 averages around 9% over 20 years - meaning your £5k would on average become £30k. That’s a £25k risk
Couldn’t disagree more. It’s guaranteed capital deterioration (inflation), not preservation, and there is almost no chance of an upside. Yes, buying an index fund carries risk of downside (mostly in the short term), but compare the returns from any year since records have begun - the opportunity cost is enormous.
The British are not heavly taxed, for instance our annual income tax free allowance is double most other european countries. Among those countries with universal health care we have low taxation and if you think the US is lower taxed would you really want to put up with their apalling labryinthine multilayered tax system? - even before you consider that ferociously high cost of healthcare there (where also your care is ultimately capped by the limits of your insurance unless you are very rich )
@@BanthahI agree money de-value over time in the past century, so the wisdom was to flee to hold real assets. But picking the right stock/fund from S&P 500, and time the market right, is not easy for layman. 80% people loses in stock market and funds; I believe there are too much misinformation in the financial market and mis-sales driven by commission and management fees. I still think the loss in real value due to inflation, is the lesser evil compared to stock/funds' investment loss from mis-sale/misinformation (and this hasn't consider capital gain and income tax yet)
@@jabberwockytdi8901British are heavily taxed compare with Singapore and Hong Kong (no capital gain and dividend income tax), and no N.I or 20%/40% income tax thresholds and compulsory pension that may extend to age 71+
Additional rate payer here, yes PB are where I stick my emergency fund. It's liquid, safe, and if I'm lucky enough to win (usually between £25-£100 a month) I don't pay any tax.
I love PB. I use them to save for big one off expenses such as our family holiday to Florida and now saving for our wedding next year. For me they're risk free and I might win some money along the way (which i have done). Loving all your videos Damien 🤩
@@DamienTalksMoney the risk-off nature of them vs the stock market where most people will have their pensions & ISA's invested is part of the attraction of premium bonds - parking your tax value in there is a great idea!
Very informative, Damien. I have held some NS&I index linked savings certificates for years as another tax free option. Shame they are so rarely available now!
Index linked. So glad I made the maximum subscription, issue after issue. But even then they rig the return by changing the index to a doctored lower one.
I’ve £50k ‘invested’ in Premium Bonds because I’ve maxed out my stocks and shares ISA allowance over the last 6yrs, and I’m also a pensioner so can no longer contribute to a pension fund. For me it’s just somewhere to park some money virtually risk free as opposed to the aforementioned ISAs, and where the earnings are also free of tax liability, and any monthly winnings I receive just supplement my pension… or occasionally not, they are also quite accessible should I need to withdraw any further funds should the need arise. All this means I can leave the ISA’s untouched to grow and to mitigate any loss of earnings in the premium bonds in relation to inflation. I feel this all gives me a balanced risk on my investment portfolio, letting me supplement my pension while leaving all my capital where it is until I need it, or choose to start spending it. They’re not for everyone, but for those in particular circumstances, they’re ideal. At least that’s how I justify them with my man maths 😉😂
Great video again Damien. I’ve never seen PB as an investment but just a prize draw. It always puzzled me why PB advertised it as such? Your video explains it brilliantly.
Great vid as always. Keep pushing the space - the extra detail and effort in these videos doesn’t go unnoticed! On tax free income that you cover at the end… one thing I don’t see a lot of people talking about w.r.t. tax free sources here in the uk… the income from Gilts/uk gov bonds are exempt from capital gains tax. Long story short, this makes up the majority of the return on gov bonds (as the bond is typically bought for less than its principle). With higher rates and outdated tax free thresholds on interest income, a lot of people have been putting money into these to achieve a better post-tax return on their cash. Even more relevant now capital gains tax allowance will be 1/4 of what is was. Could be worth running the numbers and exploring this topic in a video while rates are still high. Although this is mainly attractive to people who are higher rate tax payers, past 10k invested interest income (as you mention) and already filled 20k ISA allowance for the year… so limited audience. But gilts are getting more interest because of this. Cheers, Nick
Its not entirely straitforward but is actually a good idea. There are different gilts and at the moment the short dated are yielding more than the longer term. The interest or coupon on gilts is taxable the gain is not. So the trick is to buy low coupon and maximise the gain element.
Well I've had £40,000 invested at one time, however with £21,500 invested I recently won £10,050 which sure reaffirms my faith in NS&I. I would rather take a no loss gamble than give banks my monies to make themselves rich, whilst rewarding me with next to nothing.
I like investing in close-end funds that pay monthly dividends. The trick is to hold long term and reinvest the monthly dividends plus buy more shares on a monthly basis or whenever you can afford to. This can be easily done because close-end funds are bought and sold on the stock market just like regular stock. That'd be enough to create a portfolio that would pay you between $50k to $70k in dividend income
What no one ever mentions when having a discussion regarding premium bonds is the £85,000 that’s guaranteed per institution when they go under. In these uncertain times when any company can go under, I would like to know I’ve at least tried to minimise my exposure. So once I’ve put the majority of my money in the 4 institutions I trust the most, I’m happy with £50,000 sitting in premium bonds, because I know that money is safe. With the added excitement of maybe winning something big 😀
This is spot on. For people with larger assets, it can be hard to find enough protected parking sports for the risk-off portions of their portfolio. You can basically treat NS&I like another banking group in that respect.
im adding to these monthly as an emergency fund im not bothered if i get a win the thought of another 2008 and the banks doing a bail in not a bail out means i will be able to pay my bills if SHTF. good vid 👍
NS&I is now in Lytham not Blackpool Damien - the old offices are now a housing estate/or in the process of being converted into a housing estate. Appreciate the effort to go on location though.
@@ilikeboringthings9you don’t need to apologise! They list it as an office on Google still so when I first arrived I wondered why it looked like a dystopian nightmare…
Those bonds are tax free which makes a good difference. And people love positive skewed investments. That's the same reason people prefer lottery like stocks (growth) over value stocks
Never done the lottery as always seen it as a way of paying more tax. Premium Bonds were great after I had to come out of pension fund due to LTA rules and maxed out ISA. Rate is comparable to good savings, your money is safe and there is a chance... I am biased as I got lucky and won £50K last year. So my annual return was over 100%
For an emergency fund I prefer the Vanguard Sterling Short-Term Money Market Fund paying 5% , 🤷♂️ Put it in as part of my ISA allowance. But obviously everyone has different financial circumstances.
I won lots last year!!!! Very fortunate year considering I only had a few k in it. Ive now put my house deposit into it instead of investments for assurance that I will have the money when we close in a few months :)
Nice Damien thanks, I really liked the way you put this together, noticable increase in the production values. Reminds me of 'the big short' one you did
Ive had my house fund parked in there for 2 years now. 22-23 i got a 4% return and 23-24 i hit 8%, so im pretty happy! Only ever had a couple of months with no prizes at all and most the time i've had a couple of hundred quid.
I saw a chart about stocks, it showed the last time the stock market was concentrated into a few stocks was 1928 before the crash, is this going to happen now? Could the ideological regulation of LLM's burst the bubble?
I had some premium bonds bought for me as a child. When I was old enough to open a kids bank account which paid a good rate of interest, I cashed out my bonds and put them into the account. I think to date, that's been the best "investment decision" I've ever made. Premium bonds are only worth thinking about for people who have more cash than they know what to do with, i.e. they can max out their premium bonds and just leave it there. The point being that the money is safe and any "winnings" are free of tax.
Over the last 12 months my NS&I maximum holding Annual Percentage Rate was 2.4% tax free. My wife’s APR is 4.1% tax free. It is FUN. My 2 Stocks&Shares ISAs are returning 17% & 18.9% but just aren’t as much fun.
Good place to park cash with instant access and no tax implications. Sometimes convenience is more important than scraping every last drop of interest.
Unrelated to the video Damien, although keep up the good work as I am following, but will you be producing content around crypto and taxes again anytime soon? With the spot Bitcoin ETF approvals, April supply halving and bull run to follow over the next year, will probably need a fresh look at when the markets get exited from a tax perspective/saving, especially as Jeremy’s 3k CGT cap comes into force in Aprils new tax year!
We just started doing bonds. Our reason for it is, we’ve played the lottery for years and never really won more than a couple of quid and we are bad at dipping into our savings. By using the money we play the lottery with, plus what we save. We are guaranteed to save money and maybe have a chance of winning extra. If we don’t win anything, it’s no big deal because we haven’t lost anything either.
Back in the 1990s when I dabbled with Premium Bonds I read a notice in the local Post Office that stated that the premium bond total prize fund as a percentage was calculated based on the the LIBOR rate (not the BoE bank rate which some people might have assumed at the time). Usually the BOE rate and LIBOR whilst not always the same fluctuated within a small margin so it was of no real consequence. Then the GFC hit in 2008/9. I noticed that the prize rate percentage was quickly slashed like the BoE rate. However the LIBOR continued to hold up at around 5%, This struck me as odd seeing as I remembered what I read all those years earlier. If my memory has not failed me here, I have long suspected that the link between a benchmark interest rate and prize amounts was quietly ditched a long time ago and bond holders have been right royally ripped off ever since. No, I don't intend to put my money into PBs.
Can’t believe you came all the way to Blackpool just to film that bit 😂 hope you did something else before you went back if I’d have known I’d have put the kettle on just over in Thornton here. 👍🏼
Yes I agree with you But if you got a spare £50000 then why not put it there as then it’s not in the bank as not every but most still have to pay tax on their interest So I think why not take a gamble as your money is completely safe Plus I do win a fair bit not every month but a fair bit
You've missed something here. Firstly you should have been a bit more explicit about the income tax benefits: it's clear from some comments that some posters haven't grasped this point. But the other thing is the avoidance of Capital Gains Tax. The CGT allowance is £6000 this year, but going down to £3000 from April 6, and soon it will probably be abolished. So how many people are going to be affected by this in the future? More and more. Particularly when they (typically) receive inheritances or downsize their homes, etc. If you put £50k in (real) investments outside a tax shelter, assuming you have maxed out your ISA for that year, you are either going to be paying dividend tax, or paying CGT, at some time. The coming disappearance of CGT allowance enhances the tax efficiency of PBs further.
You only pay CGT if you make a gain. If you invest in a taxable share account, you might make a gain, and you get to keep 60% of that gain. You also might get dividends, which you pay tax on above the allowance. With PB, you are guaranteed not to make a capital gain, and the average luck interest is below the dividend allowance.
@@hughmp Yes, they're often going to be better than a bank account, and for low yield gilts the fact that the coupon is subject to income tax won't matter: most of the gain will be as "capital growth", even though it's entirely predictable if you hold to maturity (e.g. a 2-year gilt, something like that). And the disappearance of CGT and Div Tax allowances also enhance their "tax efficiency". They can also effectively function as an "emergency fund" because in practice you can always sell short-dated gilts before maturity and get a pretty much predictable price.
@@mikerodent3164 exactly! Why are so few talking about the advantages of gilts?! 100% guaranteed by the government as well so even better than the usual 85k FSCS protection!
@@hughmp There should be more talk about them, at least direct buying of short-dated gilts. Obviously the *bond fund* market has just suffered, over the past 18 months, the most catastrophic crash ever in the history of bonds. It is even more shocking that there's hardly any talk in the media/social media about that. I think millions of UK people, whose pension contribution managers have been lazily dumping their money into default 60-40 "LifeStrategy" funds, are probably not even aware that their pension funds are smaller now **in absolute terms** than they were 2 years ago, despite their having paid in all that time! (and despite the fact that 2023 was a record year for most stock markets). So maybe "bonds" are somewhat scary for the average non-gender homo sapiens on the Clapham omnibus? As I happens I've got to find a home for several 100s of 000s due to a parent dying recently. A 2-year gilt will earn me a pretty boring 4% pa, so it seems that I may go for this 50k PBs instead: I hold 0 currently. But either would beat a bank account.
Can you put a price on ‘fun’.. surely that’s subjective. I think it’s a good idea when your PSA is exhausted and your ISA allowance has been maxed for the year.
You can't cash out one of the old £1 premium bonds. When my dad passed away some years ago I was told they wouldn't send the £1 value of his single bond as it was too low. So for people who have had just the single bond for several decades it's value is now just a nominal value, not a genuine value. As you said it's just a long term, now non refundable, lottery ticket.
24million Brits. Never knew this well invested us Brits are. We do love them Damian !!!! Don’t we. I have held 50k twice while have money free between purchases elsewhere. I heard once something like 20-40% have the max 50k!! You may have mentioned it in the video
Yh you might earn £500/year more in a high interest savings account. But I do enjoy the spiciness of a premium bond. Scratches that gambling itch in a more safe way than other means
high Skewness is a negative thing. it's the same as owing individual stocks you have more risk due the Skewness but the same returns therefore you want to diversify to reduce the Skewness and keeing the expected returns. If you want UK BONDS exposure Unless premium bonds have enough of higher interest rate you probably want to get normal bonds.
You don't understand Premium Bonds. Are they a good investment? Nope, but they are tax efficient, and as Damien says, that's what their main benefit is. Also, they are extremely liquid. Other bonds, including gilts aren't, and the minimum purchase is higher, and you can't set up a direct debit to buy them from HM Debt Management Office. So, like any investment, you have to choose your poison.
I don't understand when premium bonds results have already come out say on the 1st or 2nd and you check yours it's says next result 3rd of that same month. And also it's always Sussex, Essex etc always outside London that wins, or Surrey in London the only place from London more outside Londoners than in London where people are actually poorer due to cost of rent, transport etc. People are too poor to move out of London after rent etc nothing left to save up and get a deposit to move outside London
My grandad bought me £100 worth of premium bonds 31 years ago. I logged into the account last month for the first time and NS&I said I had no wins 😦 I never expected much but still
Even if it were a good choice tax wise after maxing out ISA's etc. how many people in this country are able to put money in an ISA at all after contributing to a pension, never mind max it out . There must be a hell of a lot of people with premium bonds alongside or instead of an ISA account.
Several colleagues retiring recently seem to think it is "essential" to take the maximum tax free lump sum from their pension. That could easily be five years of ISA allowances.
Next time you are filming in Lancashire, happy to be your camera man for some shots. Am a professional photographer turning TH-camr based in Blackpool on the beach :)
My late father had the maximum stake and was always winning small and medium amounts. When he died I inherited them for 12 months but had to tell them that they were mine. From that moment i never won a cent. Statistically very suspicious.
Man I bought £100 of premium bonds over 10 years ago and totally forgot about them until I saw this video. I’m going to guess it will still be £100 worth given how lucky you’d need to be to win anything! Going to try find out my information for them now
If a basic rate taxpayer you can put in a NS&I Direct saver about £27400 and not pay any tax on the interest currently at the interest rate offered. That is about £999.99 in interest per year. So you could have in total £50k in Premium Bonds, £20k in an ISA and about £27,400 in an easy access account paying 3.3% and not pay any tax at all. Nearly £100k.
I had a large capital gain in the current tax year, so I'll have to do a tax return, and keep money aside to pay the capital gains tax. As a result, I have £25,000 in Premium Bonds, as I'd rather do that than pay tax on any interest accrued. I believe I don't have to pay the tax man until Junuary next year, so there's a small chance I'll win more than I'd get in interest, tax free. So far, I've won £850 in various small prizes, which is automatically used to buy premium bonds. Like Damien says, though, this isn't an investment.
The roll dice attitide in ZIRP yup yup yup. This was very much TINA time. May as well shove them in Premium Bonds back then. I too back early 2020 looked into probability. And opp cost elsewhere. God was it dull but came same conclusion. Have them in low no interest rate environment if not in property ( better ) … Now it’s anything other than PBonds. As your conclusion came too.
My Gran put £500 in for me when I was 10 and I finally managed to find the details for it when I was 33. It was still worth £500. Not the greatest investment somehow.
Listening to this video in the background and heard bits about the history of tontins and "touch wood" and Valentine cards sent to a machine called Ernie... 🤦🏽♂️
I've won £125 over 2 years with just over 2 grand - much better than I'd get with any savings account. A good emergency fund. I tend to just stick £30 a month in and forget about it.
I really don't understand why people like premium bonds, especially those who are normal tax rate earners, it's bonkers. My Uncle was trying to sell me on it last weekend and I just think people are looking at it very emotionally (i.e. it's exciting to win a hundred quid every now and again over a 'boring' return on the ISA / stocks ).
What a great video! I hold premium bonds as I've maxed out my isa and have also reached the 1000 tax threshold on cash savings so they act as a holding place to keep the taxman's grubby hands off my savings whilst I wait for the new isa tax year to start.
10:00 But won't £1,500 of that £2,500 interest be taxable? You pay no tax on premium bonds. I haven't done the maths, so I imagine the interest is probably still better even with tax deducted, but people can get nervous about additional taxes. They're unsure how to pay it or how much to pay.
My mum loves it as she hates risk, I kinda like it but I wanna and do take far more risk Crypto Employee share save scheme Index funds High yield savins accounts
My wife and I have 50K each in PBs and have for the least year alone won over 1.5 grand each. Not bad considering it's tax free. So we win every month but once it lapsed into not winning at all for say 6 months or even a year, then we'd sell them. For ordinary people like me and the wife pensions have been a disaster over the last 35 years with big rises and huge falls over that time. All we've done is kept a plethora of "financial advisors" in a decent living. My advice, get it spent, there are no pockets in shrouds.
Yes they are. Bank rates are crap. Premium bonds pay out better payments than any bank, and your money is safe. You can withdraw your money at anytime. Instead of taking the money reinvest the winnings in more bonds whitch go straight back into the Premium draw.
Yep, its the tax free element that makes the difference. On average my bonds makes more than saving accounts because of how much the savings would get taxed
It’s like a lottery but just not for chumps, you get entered into a draw every month and can always redeem your initial capital/ amount paid for a ticket.
Stick 50k in & achieve average or below average winnings & the tax free aspect is actually relatuvely attractive (assuming you are already using up your yearly savings income tax free allowance) This is pretty much the main selling point though (beyond the offchance of winning big)
I stopped my DD to lotto around mid 2021. I basically just took my £25 DD for Lotto and instead used it to get premium bonds. I was lucky to win £100 last October which now has my pot at £1125. That’s more than I have seen in return from lotto in a 5 year period. I’d go as far as to say with lotto I was massively out of pocket. This swap was and still is a no brainer for me. When pairing up against lotto.
@@slabbygabby well my logic was this was my lottery alternative. I also am currently paying a mortgage on my first property. And I dont max out my ISA so I didn’t see a benefit in LISA. Unless I’m missing something
I had just over a thousand pounds in my account when I won £5,000 last year. I’ve decided to withdraw all the money and look at investing instead since I don’t think I’d ever win on it again.
I know several people with Premium bonds, some win all the time some hardly at all, so maybe some batches of numbers are luckier than others. Luck is chance and probability at play, the fact that you won £5000 doesnt affect your chance of winning the same amount the next month or the one after that. With your luck I'd have kept £1000 of the winnings and put the other 4k in more PB's. If you win nothing again for the rest of your life it's still not cost you anything as you kept £1000 of your winnings, and you would still have £5000 safely stored away.
One aspect you didn't highlighted is the security of premium bonds. It's important to note that NS&I is government-backed, ensuring the safety of funds in the event of bank failures or similar circumstances. This makes premium bonds a secure alternative option for holding money also.
Essentially, if you struggle with good financial habits (such as paying yourself first and leaving your savings alone) then premium bonds can be a helpful tool to help you save. They are not investments in my view, but a lottery ticket where you loan the government money and you might get a prize over your entire life, with the benefit of not affecting your Capital Gains Tax :) People on the internet stating it has a "yield " claiming the chance to win is an effective interest rate is at best misrepresentation and at worse a terrible lie.
But it's still nice when you win a couple of hundred quid and Camelot didn't get to keep it. Ah if only John major had been a statesman of Harold Macmillan stature.
With ISA’s maxed out, as couple we have the max allowance of £100k. It will be 19 months at the end of March. I have had double the return over that period compared to my wife. Against the best savings accounts we are only slightly down on what we would have earned after tax. We are happy to accept that.
This is a solid video! I've been keeping most of my emergency fund and house deposit in Premium Bonds for the last 2-3 years for the exact reasons you describe at the end. I've found the golden amount to hold is between £20k and £25k for "luck" and payout reasons. Using the MSE calculator, I worked out that keeping less than £10-15k or greatly increased how much luck factors into the winnings. In my personal situation I've found I've been better off with PBs compared to best interest savings I had access to by about £100 in the last year. It definitely needs to be compared to savings account as opposed to an investment. Obviously in my case I should've invested 2-3 years ago, but I may need quick access to the money, and I'm not eligible to use a LISA for house purchase.
My portfolio for the past 30 years has always been self managed and I own 3 shares of Berkshire Hathaway Class A stock (BRK:A) which I bought in at about $17,000 during the mid 90s, I’m currently liquidating some of these positions to incoporate new Gen. Stocks, but am I better off re-investing into Gold as it seems stocks are a little too unstable right now.
My take - ignore the big prizes because you won't win them (and if you do, it a nice exception to the rule). Focus on the steady stream of £100 and below prizes (if you hold enough bonds). With £50k held, I normally win zero two months a year, £300+ two months year, and the rest average out at £100 or so. Total over the last 12 months is £1700, tax free, so not too bad. Also don't totally ignore the mid range prizes, over the last 20 years I've one on £1k prize (I only had £30k invested back then) plus one £500 prize - so these come up once a decade or so. This variability makes it futile trying to compare the "investment rate" with other ways of saving, one lifetime is too short to average out these effects.
The fact you get cash out is nice, however even at 30k 1k winnings is about 3% assuming the rest of the year ran even with your averages (which it probably wouldn't as your averages are for 50k) your hitting 9% tax free return for the big win year. Taking your 50k and your average return it's actually about 3.4% YoY which is a bit meh. I think PBs are a good emergency fund as it's a bit of a set and forget with no tax implications but not great for wealth creation. I do pay into premium bonds regardless as I find it convenient to have as a ready cash source which can be useful for throwing into ISAs and the like at the start of the year. I do however wonder if with my level of income I'm better off elsewhere.
@@kieron8051 That is assuming you haven't already filled up your ISA allowance. The real question is whether its better to put it into a regular ETF and pay capital gains or park in premium bonds for tax free growth. Given market exposure through pensions and ISA, my view would be to go the NS&I route for at least a certain amount as its a risk off asset to balance you out.
Probably not a good investment. But if you're self employed or someone who (like me) gets most of their income from dividends, it's not a bad place to use as a "tax reserve". Putting money aside that you know you'll have to pay to the taxman eventually. So, not as a saving strategy but so you don't get a tax bill you can't pay.
What a video Damian! Loved the new format, loved the structure of the video and the fact that it contained everything that it needed and still wasn’t boring or too long. Bit of history, a few puns and jokes, maths and taxes of it all and then the personal reference and your personal take. Great video overall, keep up the good work!
![[TH] FS vs BME - VCT Ascension Pacific - Lower Bracket Final](http://i.ytimg.com/vi/wnygqsR2Fig/mqdefault.jpg)
This video is the first in a new series where each month we will examine whether popular ways to save and invest actually live up to their promises. Please drop your suggestions below for what else you want me to cover.
Fantastic idea Damien! I'm definitely here for the journey.
Gold
Uranium
Gold&Silver please. Thanks. Love your videos.
Great video. I'd be interested in a look at investing in classic cars and similar depreciating assets that people convince themselves are a good investment.
I've my emergency fund in premium bonds. I find it handy as I'm not tempted to spend it as its out of my current account. Also i do it instead of the lottery for a small bit of excitement in an otherwise rather dull existence 😂
Exactly the same reasons as myself. 🙂
😂
They are fantastic! Every friend abroud is jelous we have them here.
That's EXACTLY how I view mine! As an emergency fund, that's safe, and not easy to spend, and can win you money! I won in November, December, January, and March! A tidy sum too!
Premium Bonds are far better than the lottery. Unlike the lottery you don't lose money if you don't win.
It's highly liquid (withdraw when needed), risk-free (guarantee capital preservation) and tax-free, with high potential upside (albeit low chance). Certainly has its unique place and value amongst the heavily-taxed British. As you said, it's a tax-free shelter for the people (especially those who can't afford to hire accountants to setup companies/FICs to dodge tax), so it's doing good for the public
Agree with everything you’ve said, apart from it being risk free.
The very real risk is that you don’t win anything, and are losing out on gains elsewhere.
Let’s take the average £5k investment and the 5% return that Damien mentioned. Investing £5k after 20 years at 5% you end up with £13.5k - a gain of £8.5k.
If you put your money into Premium Bonds and don’t win anything you still only have your original £5k - which every year is losing buying power because of inflation - especially these days.
It is not risk free at all. Your risk is an £8.5k loss
And that’s at a low 5% rate.
Investing in the S&P 500 averages around 9% over 20 years - meaning your £5k would on average become £30k. That’s a £25k risk
Couldn’t disagree more. It’s guaranteed capital deterioration (inflation), not preservation, and there is almost no chance of an upside. Yes, buying an index fund carries risk of downside (mostly in the short term), but compare the returns from any year since records have begun - the opportunity cost is enormous.
The British are not heavly taxed, for instance our annual income tax free allowance is double most other european countries. Among those countries with universal health care we have low taxation and if you think the US is lower taxed would you really want to put up with their apalling labryinthine multilayered tax system? - even before you consider that ferociously high cost of healthcare there (where also your care is ultimately capped by the limits of your insurance unless you are very rich )
@@BanthahI agree money de-value over time in the past century, so the wisdom was to flee to hold real assets. But picking the right stock/fund from S&P 500, and time the market right, is not easy for layman. 80% people loses in stock market and funds; I believe there are too much misinformation in the financial market and mis-sales driven by commission and management fees. I still think the loss in real value due to inflation, is the lesser evil compared to stock/funds' investment loss from mis-sale/misinformation (and this hasn't consider capital gain and income tax yet)
@@jabberwockytdi8901British are heavily taxed compare with Singapore and Hong Kong (no capital gain and dividend income tax), and no N.I or 20%/40% income tax thresholds and compulsory pension that may extend to age 71+
Additional rate payer here, yes PB are where I stick my emergency fund. It's liquid, safe, and if I'm lucky enough to win (usually between £25-£100 a month) I don't pay any tax.
I love PB. I use them to save for big one off expenses such as our family holiday to Florida and now saving for our wedding next year. For me they're risk free and I might win some money along the way (which i have done). Loving all your videos Damien 🤩
Yeah I also save my tax money in them! They have a special place in my financial heart
@@DamienTalksMoney the risk-off nature of them vs the stock market where most people will have their pensions & ISA's invested is part of the attraction of premium bonds - parking your tax value in there is a great idea!
Very informative, Damien. I have held some NS&I index linked savings certificates for years as another tax free option. Shame they are so rarely available now!
Index linked. So glad I made the maximum subscription, issue after issue. But even then they rig the return by changing the index to a doctored lower one.
I’ve £50k ‘invested’ in Premium Bonds because I’ve maxed out my stocks and shares ISA allowance over the last 6yrs, and I’m also a pensioner so can no longer contribute to a pension fund.
For me it’s just somewhere to park some money virtually risk free as opposed to the aforementioned ISAs, and where the earnings are also free of tax liability, and any monthly winnings I receive just supplement my pension… or occasionally not, they are also quite accessible should I need to withdraw any further funds should the need arise.
All this means I can leave the ISA’s untouched to grow and to mitigate any loss of earnings in the premium bonds in relation to inflation. I feel this all gives me a balanced risk on my investment portfolio, letting me supplement my pension while leaving all my capital where it is until I need it, or choose to start spending it.
They’re not for everyone, but for those in particular circumstances, they’re ideal.
At least that’s how I justify them with my man maths 😉😂
Great video again Damien. I’ve never seen PB as an investment but just a prize draw. It always puzzled me why PB advertised it as such? Your video explains it brilliantly.
Great vid as always. Keep pushing the space - the extra detail and effort in these videos doesn’t go unnoticed!
On tax free income that you cover at the end… one thing I don’t see a lot of people talking about w.r.t. tax free sources here in the uk… the income from Gilts/uk gov bonds are exempt from capital gains tax. Long story short, this makes up the majority of the return on gov bonds (as the bond is typically bought for less than its principle). With higher rates and outdated tax free thresholds on interest income, a lot of people have been putting money into these to achieve a better post-tax return on their cash. Even more relevant now capital gains tax allowance will be 1/4 of what is was. Could be worth running the numbers and exploring this topic in a video while rates are still high. Although this is mainly attractive to people who are higher rate tax payers, past 10k invested interest income (as you mention) and already filled 20k ISA allowance for the year… so limited audience. But gilts are getting more interest because of this.
Cheers, Nick
Its not entirely straitforward but is actually a good idea. There are different gilts and at the moment the short dated are yielding more than the longer term. The interest or coupon on gilts is taxable the gain is not. So the trick is to buy low coupon and maximise the gain element.
@@rupertmiller4718 exactly, a bit of nuance to it, but can be an attractive option
Well I've had £40,000 invested at one time, however with £21,500 invested I recently won £10,050 which sure reaffirms my faith in NS&I. I would rather take a no loss gamble than give banks my monies to make themselves rich, whilst rewarding me with next to nothing.
I like investing in close-end funds that pay monthly dividends. The trick is to hold long term and reinvest the monthly dividends plus buy more shares on a monthly basis or whenever you can afford to. This can be easily done because close-end funds are bought and sold on the stock market just like regular stock. That'd be enough to create a portfolio that would pay you between $50k to $70k in dividend income
What no one ever mentions when having a discussion regarding premium bonds is the £85,000 that’s guaranteed per institution when they go under. In these uncertain times when any company can go under, I would like to know I’ve at least tried to minimise my exposure. So once I’ve put the majority of my money in the 4 institutions I trust the most, I’m happy with £50,000 sitting in premium bonds, because I know that money is safe. With the added excitement of maybe winning something big 😀
This is spot on. For people with larger assets, it can be hard to find enough protected parking sports for the risk-off portions of their portfolio. You can basically treat NS&I like another banking group in that respect.
Very wise, would be nicer to get around £200k the yanks get guaranteed.
@@Loundsify agreed, or at the very least have it go up with inflation. the limit stays static for too long.
As NS&I is backed by the treasury, the £85,000 limit doesn’t apply, you’re protected up to an unlimited amount
@@PaulL42654 is that true?
Not for the individual - but great for the government
im adding to these monthly as an emergency fund im not bothered if i get a win the thought of another 2008 and the banks doing a bail in not a bail out means i will be able to pay my bills if SHTF. good vid 👍
Same here! Not sure it’s worth it as an investment but as an emergency fund it’s worth it for peace of mind
NS&I is now in Lytham not Blackpool Damien - the old offices are now a housing estate/or in the process of being converted into a housing estate. Appreciate the effort to go on location though.
Yeah i know i went there. But come on just having some fun
@@DamienTalksMoney Fair enough, sorry.
@@ilikeboringthings9you don’t need to apologise! They list it as an office on Google still so when I first arrived I wondered why it looked like a dystopian nightmare…
@@ilikeboringthings9 well handled.
@@DamienTalksMoney😂
Got Jonathan Pie feels here at the beginning
I love him. So I will take that
@@DamienTalksMoney had a beer with him before COVID - he's just as funny out of character
@@playingFTSEreally!! That is incredible
Those bonds are tax free which makes a good difference. And people love positive skewed investments. That's the same reason people prefer lottery like stocks (growth) over value stocks
Never done the lottery as always seen it as a way of paying more tax. Premium Bonds were great after I had to come out of pension fund due to LTA rules and maxed out ISA. Rate is comparable to good savings, your money is safe and there is a chance...
I am biased as I got lucky and won £50K last year. So my annual return was over 100%
For an emergency fund I prefer the Vanguard Sterling Short-Term Money Market Fund paying 5% , 🤷♂️
Put it in as part of my ISA allowance. But obviously everyone has different financial circumstances.
I won lots last year!!!! Very fortunate year considering I only had a few k in it. Ive now put my house deposit into it instead of investments for assurance that I will have the money when we close in a few months :)
Nice Damien thanks, I really liked the way you put this together, noticable increase in the production values. Reminds me of 'the big short' one you did
Ive had my house fund parked in there for 2 years now. 22-23 i got a 4% return and 23-24 i hit 8%, so im pretty happy! Only ever had a couple of months with no prizes at all and most the time i've had a couple of hundred quid.
I saw a chart about stocks, it showed the last time the stock market was concentrated into a few stocks was 1928 before the crash, is this going to happen now? Could the ideological regulation of LLM's burst the bubble?
I had some premium bonds bought for me as a child. When I was old enough to open a kids bank account which paid a good rate of interest, I cashed out my bonds and put them into the account. I think to date, that's been the best "investment decision" I've ever made.
Premium bonds are only worth thinking about for people who have more cash than they know what to do with, i.e. they can max out their premium bonds and just leave it there. The point being that the money is safe and any "winnings" are free of tax.
Over the last 12 months my NS&I maximum holding Annual Percentage Rate was 2.4% tax free. My wife’s APR is 4.1% tax free. It is FUN. My 2 Stocks&Shares ISAs are returning 17% & 18.9% but just aren’t as much fun.
An excellent piece Damien. Insightful and well explained. Against logic I'm keeping mine for the thrill born of uncertainty, and what if.
Good place to park cash with instant access and no tax implications. Sometimes convenience is more important than scraping every last drop of interest.
Fascinating level of detail and so well presented. Excellent video. All the best Damien.
Unrelated to the video Damien, although keep up the good work as I am following, but will you be producing content around crypto and taxes again anytime soon? With the spot Bitcoin ETF approvals, April supply halving and bull run to follow over the next year, will probably need a fresh look at when the markets get exited from a tax perspective/saving, especially as Jeremy’s 3k CGT cap comes into force in Aprils new tax year!
We just started doing bonds.
Our reason for it is, we’ve played the lottery for years and never really won more than a couple of quid and we are bad at dipping into our savings.
By using the money we play the lottery with, plus what we save. We are guaranteed to save money and maybe have a chance of winning extra. If we don’t win anything, it’s no big deal because we haven’t lost anything either.
Back in the 1990s when I dabbled with Premium Bonds I read a notice in the local Post Office that stated that the premium bond total prize fund as a percentage was calculated based on the the LIBOR rate (not the BoE bank rate which some people might have assumed at the time). Usually the BOE rate and LIBOR whilst not always the same fluctuated within a small margin so it was of no real consequence. Then the GFC hit in 2008/9. I noticed that the prize rate percentage was quickly slashed like the BoE rate. However the LIBOR continued to hold up at around 5%, This struck me as odd seeing as I remembered what I read all those years earlier. If my memory has not failed me here, I have long suspected that the link between a benchmark interest rate and prize amounts was quietly ditched a long time ago and bond holders have been right royally ripped off ever since. No, I don't intend to put my money into PBs.
That might be true, but Premium Bonds were better than the majority of savings accounts.
So if i put 50k in , do i get 50k back if i sell?
Yes
Can’t believe you came all the way to Blackpool just to film that bit 😂 hope you did something else before you went back if I’d have known I’d have put the kettle on just over in Thornton here. 👍🏼
Yes I agree with you
But if you got a spare £50000 then why not put it there as then it’s not in the bank as not every but most still have to pay tax on their interest
So I think why not take a gamble as your money is completely safe
Plus I do win a fair bit not every month but a fair bit
You've missed something here. Firstly you should have been a bit more explicit about the income tax benefits: it's clear from some comments that some posters haven't grasped this point. But the other thing is the avoidance of Capital Gains Tax. The CGT allowance is £6000 this year, but going down to £3000 from April 6, and soon it will probably be abolished. So how many people are going to be affected by this in the future? More and more. Particularly when they (typically) receive inheritances or downsize their homes, etc. If you put £50k in (real) investments outside a tax shelter, assuming you have maxed out your ISA for that year, you are either going to be paying dividend tax, or paying CGT, at some time. The coming disappearance of CGT allowance enhances the tax efficiency of PBs further.
You only pay CGT if you make a gain. If you invest in a taxable share account, you might make a gain, and you get to keep 60% of that gain.
You also might get dividends, which you pay tax on above the allowance.
With PB, you are guaranteed not to make a capital gain, and the average luck interest is below the dividend allowance.
You also haven’t considered Gilts which are CGT exempt. So many people are missing this
@@hughmp Yes, they're often going to be better than a bank account, and for low yield gilts the fact that the coupon is subject to income tax won't matter: most of the gain will be as "capital growth", even though it's entirely predictable if you hold to maturity (e.g. a 2-year gilt, something like that). And the disappearance of CGT and Div Tax allowances also enhance their "tax efficiency". They can also effectively function as an "emergency fund" because in practice you can always sell short-dated gilts before maturity and get a pretty much predictable price.
@@mikerodent3164 exactly! Why are so few talking about the advantages of gilts?! 100% guaranteed by the government as well so even better than the usual 85k FSCS protection!
@@hughmp There should be more talk about them, at least direct buying of short-dated gilts. Obviously the *bond fund* market has just suffered, over the past 18 months, the most catastrophic crash ever in the history of bonds. It is even more shocking that there's hardly any talk in the media/social media about that. I think millions of UK people, whose pension contribution managers have been lazily dumping their money into default 60-40 "LifeStrategy" funds, are probably not even aware that their pension funds are smaller now **in absolute terms** than they were 2 years ago, despite their having paid in all that time! (and despite the fact that 2023 was a record year for most stock markets). So maybe "bonds" are somewhat scary for the average non-gender homo sapiens on the Clapham omnibus? As I happens I've got to find a home for several 100s of 000s due to a parent dying recently. A 2-year gilt will earn me a pretty boring 4% pa, so it seems that I may go for this 50k PBs instead: I hold 0 currently. But either would beat a bank account.
Where can I get a savings account above inflation?
Can you put a price on ‘fun’.. surely that’s subjective. I think it’s a good idea when your PSA is exhausted and your ISA allowance has been maxed for the year.
You can't cash out one of the old £1 premium bonds. When my dad passed away some years ago I was told they wouldn't send the £1 value of his single bond as it was too low. So for people who have had just the single bond for several decades it's value is now just a nominal value, not a genuine value. As you said it's just a long term, now non refundable, lottery ticket.
24million Brits. Never knew this well invested us Brits are. We do love them Damian !!!! Don’t we. I have held 50k twice while have money free between purchases elsewhere. I heard once something like 20-40% have the max 50k!! You may have mentioned it in the video
Yh you might earn £500/year more in a high interest savings account. But I do enjoy the spiciness of a premium bond. Scratches that gambling itch in a more safe way than other means
high Skewness is a negative thing. it's the same as owing individual stocks you have more risk due the Skewness but the same returns therefore you want to diversify to reduce the Skewness and keeing the expected returns. If you want UK BONDS exposure Unless premium bonds have enough of higher interest rate you probably want to get normal bonds.
You don't understand Premium Bonds. Are they a good investment? Nope, but they are tax efficient, and as Damien says, that's what their main benefit is. Also, they are extremely liquid. Other bonds, including gilts aren't, and the minimum purchase is higher, and you can't set up a direct debit to buy them from HM Debt Management Office. So, like any investment, you have to choose your poison.
I don't understand when premium bonds results have already come out say on the 1st or 2nd and you check yours it's says next result 3rd of that same month. And also it's always Sussex, Essex etc always outside London that wins, or Surrey in London the only place from London more outside Londoners than in London where people are actually poorer due to cost of rent, transport etc. People are too poor to move out of London after rent etc nothing left to save up and get a deposit to move outside London
My grandad bought me £100 worth of premium bonds 31 years ago. I logged into the account last month for the first time and NS&I said I had no wins 😦 I never expected much but still
Even if it were a good choice tax wise after maxing out ISA's etc. how many people in this country are able to put money in an ISA at all after contributing to a pension, never mind max it out . There must be a hell of a lot of people with premium bonds alongside or instead of an ISA account.
Several colleagues retiring recently seem to think it is "essential" to take the maximum tax free lump sum from their pension. That could easily be five years of ISA allowances.
Which LISA do you use? Couldn't find it in the links, looking to set one up. Thank you.
Funny lines and education. There is no better combination. As always, outstanding content.
Next time you are filming in Lancashire, happy to be your camera man for some shots. Am a professional photographer turning TH-camr based in Blackpool on the beach :)
What happens to the money where the Bonds have been lost?
Obviously its encouraging people to save more. More bonds, more luck.
Maybe would be better if the prizes were lower so more people win more often.
My late father had the maximum stake and was always winning small and medium amounts. When he died I inherited them for 12 months but had to tell them that they were mine. From that moment i never won a cent. Statistically very suspicious.
Had 50ks worth for 6 months, never again.
Man I bought £100 of premium bonds over 10 years ago and totally forgot about them until I saw this video. I’m going to guess it will still be £100 worth given how lucky you’d need to be to win anything! Going to try find out my information for them now
Can I use my rrsp to buy premium bonds?
If a basic rate taxpayer you can put in a NS&I Direct saver about £27400 and not pay any tax on the interest currently at the interest rate offered. That is about £999.99 in interest per year.
So you could have in total £50k in Premium Bonds, £20k in an ISA and about £27,400 in an easy access account paying 3.3% and not pay any tax at all. Nearly £100k.
That only works for one year though. If you want to save £21K the next year you exceed the savings allowance.
This doesn't make sense. A basic rate taxpayer, if they aren't living rent free, couldn't afford to do this.
@@BigHenFor There are lots of basic rate pensioners living rent free, and reasonably wealthy.
Cracking end to the video, thanks Damo 👌😂
I had a large capital gain in the current tax year, so I'll have to do a tax return, and keep money aside to pay the capital gains tax. As a result, I have £25,000 in Premium Bonds, as I'd rather do that than pay tax on any interest accrued. I believe I don't have to pay the tax man until Junuary next year, so there's a small chance I'll win more than I'd get in interest, tax free. So far, I've won £850 in various small prizes, which is automatically used to buy premium bonds. Like Damien says, though, this isn't an investment.
The roll dice attitide in ZIRP yup yup yup. This was very much TINA time. May as well shove them in Premium Bonds back then. I too back early 2020 looked into probability. And opp cost elsewhere. God was it dull but came same conclusion. Have them in low no interest rate environment if not in property ( better ) … Now it’s anything other than PBonds. As your conclusion came too.
My Gran put £500 in for me when I was 10 and I finally managed to find the details for it when I was 33. It was still worth £500. Not the greatest investment somehow.
Listening to this video in the background and heard bits about the history of tontins and "touch wood" and Valentine cards sent to a machine called Ernie... 🤦🏽♂️
Fantastic video. Love the clips from the 60s etc
20k ISA. Max cash balance for the £1,000 tax-free interest. NS&I 50k balance. All tax-free. The best investments for tax reasons, in order.
I’m think of buying gold instead of anymore premium bonds.
I've won £125 over 2 years with just over 2 grand - much better than I'd get with any savings account. A good emergency fund. I tend to just stick £30 a month in and forget about it.
Lads with best first names rise up 💪🏼
ASSEMBLE!
I really don't understand why people like premium bonds, especially those who are normal tax rate earners, it's bonkers. My Uncle was trying to sell me on it last weekend and I just think people are looking at it very emotionally (i.e. it's exciting to win a hundred quid every now and again over a 'boring' return on the ISA / stocks ).
A friend of mine actually won £1m 😃😃😃😃
What a great video! I hold premium bonds as I've maxed out my isa and have also reached the 1000 tax threshold on cash savings so they act as a holding place to keep the taxman's grubby hands off my savings whilst I wait for the new isa tax year to start.
10:00 But won't £1,500 of that £2,500 interest be taxable? You pay no tax on premium bonds.
I haven't done the maths, so I imagine the interest is probably still better even with tax deducted, but people can get nervous about additional taxes. They're unsure how to pay it or how much to pay.
Keep watching!
@@DamienTalksMoney Haha, yeah I spoke too soon, should have waited until the end.
@@NoNowwwellyou’ve not considered Gilts which are CGT exempt and better than all the other options
I prefer my money working for me, thank you!
I won £1,150 two months ago, biggest win so far. Hubby keeps a spreadsheet to see if it’s worth carrying on or investing our money instead
Are you Martin Lewis Jr? He would be so proud of his unknown child. Damien your channel is wiked!
😂 the walk round the gate at the end😂
I don't have bonds for the prize draw, that's pointless, it's just there for saving. I've had my account for 5 years, still never won a prize lol.
I just love premium bonds.
Viewed as a recycling lottery ticket it's not a bad thing to dump a small amount on.
My mum loves it as she hates risk, I kinda like it but I wanna and do take far more risk
Crypto
Employee share save scheme
Index funds
High yield savins accounts
Premium Bonds is our emergency fund, once we've exhausted other options.
I've made 50% gains on Nvidia in the last year. For at least this year thats where my funds will sit
My wife and I have 50K each in PBs and have for the least year alone won over 1.5 grand each. Not bad considering it's tax free. So we win every month but once it lapsed into not winning at all for say 6 months or even a year, then we'd sell them. For ordinary people like me and the wife pensions have been a disaster over the last 35 years with big rises and huge falls over that time. All we've done is kept a plethora of "financial advisors" in a decent living.
My advice, get it spent, there are no pockets in shrouds.
Wherever there
Premium bonds are tax free, that is a major pull for many especially if you are paying income tax at 40% or above
Good explanation
Yes they are. Bank rates are crap. Premium bonds pay out better payments than any bank, and your money is safe. You can withdraw your money at anytime. Instead of taking the money reinvest the winnings in more bonds whitch go straight back into the Premium draw.
We won over 25k 2023 and this first Q of 2024 we won £4800 but you do need to leave them in for over 3 years plus to win anything exciting
As a high rate tax payer the fact they are tax free, safe as can be and can be accessed whenever make it a no brainier for emergency fund.
Totally right. Easy to transfer the money in and kinda forget about.
Agreed.
Yep, its the tax free element that makes the difference. On average my bonds makes more than saving accounts because of how much the savings would get taxed
A cash ISA is tax free too...
What looollll. Have you maxed out your sipp and isa
The production quality on your videos is really getting next level. Watching the journey is such a joy. Love to see it.
Thank you so much! Only just getting started I want to really see what a finance video can be and currently I am held back by my own lack of skills
Walking around the barrier into the "fortress of a compound" at the end 🤣🤣
th-cam.com/video/BpRZSPNZY7w/w-d-xo.htmlsi=fRtAF5kFv_JMAI8K
“Because sometimes, it’s really hard to actually do your own ideas” 😄
@@wheeldo Its an empty building been like that for years :) They moved out and built houses as you can see in the video.
The production value on these videos is really starting to show, love the content keep up the good work.
Premium Bonds = Middle-class Lotto
Not a fair comparison? You don't get your stake back with lotteries...
@@JohnBeeblebrox It's a fair comparison. It's still a lottery; you're just gambling with the interest.
It’s like a lottery but just not for chumps, you get entered into a draw every month and can always redeem your initial capital/ amount paid for a ticket.
I once dated a girl who advised me to put my savings in premium bonds and I literally had to stop myself from laughing in her face when she said it 😂
Stick 50k in & achieve average or below average winnings & the tax free aspect is actually relatuvely attractive (assuming you are already using up your yearly savings income tax free allowance)
This is pretty much the main selling point though (beyond the offchance of winning big)
I stopped my DD to lotto around mid 2021. I basically just took my £25 DD for Lotto and instead used it to get premium bonds.
I was lucky to win £100 last October which now has my pot at £1125. That’s more than I have seen in return from lotto in a 5 year period. I’d go as far as to say with lotto I was massively out of pocket. This swap was and still is a no brainer for me. When pairing up against lotto.
I've won £1100 since October. £50k holdings as it's basically my deposit for a house.
@@Loundsify Why not use a Lisa? Or have you mixed your Lisa out?
Plus you still have £1125 cash 💴
@@slabbygabby well my logic was this was my lottery alternative.
I also am currently paying a mortgage on my first property. And I dont max out my ISA so I didn’t see a benefit in LISA. Unless I’m missing something
I had just over a thousand pounds in my account when I won £5,000 last year. I’ve decided to withdraw all the money and look at investing instead since I don’t think I’d ever win on it again.
I know several people with Premium bonds, some win all the time some hardly at all, so maybe some batches of numbers are luckier than others. Luck is chance and probability at play, the fact that you won £5000 doesnt affect your chance of winning the same amount the next month or the one after that. With your luck I'd have kept £1000 of the winnings and put the other 4k in more PB's. If you win nothing again for the rest of your life it's still not cost you anything as you kept £1000 of your winnings, and you would still have £5000 safely stored away.
Ironically your chance of winning would be six times what it was before
One aspect you didn't highlighted is the security of premium bonds. It's important to note that NS&I is government-backed, ensuring the safety of funds in the event of bank failures or similar circumstances. This makes premium bonds a secure alternative option for holding money also.
Essentially, if you struggle with good financial habits (such as paying yourself first and leaving your savings alone) then premium bonds can be a helpful tool to help you save. They are not investments in my view, but a lottery ticket where you loan the government money and you might get a prize over your entire life, with the benefit of not affecting your Capital Gains Tax :) People on the internet stating it has a "yield " claiming the chance to win is an effective interest rate is at best misrepresentation and at worse a terrible lie.
But it's still nice when you win a couple of hundred quid and Camelot didn't get to keep it.
Ah if only John major had been a statesman of Harold Macmillan stature.
With ISA’s maxed out, as couple we have the max allowance of £100k. It will be 19 months at the end of March.
I have had double the return over that period compared to my wife.
Against the best savings accounts we are only slightly down on what we would have earned after tax.
We are happy to accept that.
And to Damo's videos I say... Alright alright alright!
HAHA YES! love this.
Lotto= idiot tax
This is a solid video! I've been keeping most of my emergency fund and house deposit in Premium Bonds for the last 2-3 years for the exact reasons you describe at the end. I've found the golden amount to hold is between £20k and £25k for "luck" and payout reasons. Using the MSE calculator, I worked out that keeping less than £10-15k or greatly increased how much luck factors into the winnings.
In my personal situation I've found I've been better off with PBs compared to best interest savings I had access to by about £100 in the last year. It definitely needs to be compared to savings account as opposed to an investment. Obviously in my case I should've invested 2-3 years ago, but I may need quick access to the money, and I'm not eligible to use a LISA for house purchase.
My portfolio for the past 30 years has always been self managed and I own 3 shares of Berkshire Hathaway Class A stock (BRK:A) which I bought in at about $17,000 during the mid 90s, I’m currently liquidating some of these positions to incoporate new Gen. Stocks, but am I better off re-investing into Gold as it seems stocks are a little too unstable right now.
Just buy Gold and protect your assets, the stock market is a rollercoaster.
I have £50k in premium bonds and on average I get over £200 a month so I don’t think that’s too bad
My take - ignore the big prizes because you won't win them (and if you do, it a nice exception to the rule). Focus on the steady stream of £100 and below prizes (if you hold enough bonds). With £50k held, I normally win zero two months a year, £300+ two months year, and the rest average out at £100 or so. Total over the last 12 months is £1700, tax free, so not too bad.
Also don't totally ignore the mid range prizes, over the last 20 years I've one on £1k prize (I only had £30k invested back then) plus one £500 prize - so these come up once a decade or so. This variability makes it futile trying to compare the "investment rate" with other ways of saving, one lifetime is too short to average out these effects.
I think this proves the point Damien is making. Thanks for sharing.
The fact you get cash out is nice, however even at 30k 1k winnings is about 3% assuming the rest of the year ran even with your averages (which it probably wouldn't as your averages are for 50k) your hitting 9% tax free return for the big win year.
Taking your 50k and your average return it's actually about 3.4% YoY which is a bit meh. I think PBs are a good emergency fund as it's a bit of a set and forget with no tax implications but not great for wealth creation.
I do pay into premium bonds regardless as I find it convenient to have as a ready cash source which can be useful for throwing into ISAs and the like at the start of the year. I do however wonder if with my level of income I'm better off elsewhere.
@@kieron8051 That is assuming you haven't already filled up your ISA allowance. The real question is whether its better to put it into a regular ETF and pay capital gains or park in premium bonds for tax free growth. Given market exposure through pensions and ISA, my view would be to go the NS&I route for at least a certain amount as its a risk off asset to balance you out.
Ouch! This is very unlucky, I’ve less than 30k invested and won 10 times over the last 6 months…none of them £25 either.
In between here, also less than 30k but about 10 wins over 12 months, you got lucky with none of those being £25! @@KyleGoslan
Probably not a good investment. But if you're self employed or someone who (like me) gets most of their income from dividends, it's not a bad place to use as a "tax reserve". Putting money aside that you know you'll have to pay to the taxman eventually. So, not as a saving strategy but so you don't get a tax bill you can't pay.
Had £300 for 15 years, never won a penny so cashed out and parked it somewhere with more predictable returns.
What a video Damian! Loved the new format, loved the structure of the video and the fact that it contained everything that it needed and still wasn’t boring or too long. Bit of history, a few puns and jokes, maths and taxes of it all and then the personal reference and your personal take.
Great video overall, keep up the good work!