The UK's Dangerous Addiction to Premium Bonds
ฝัง
- เผยแพร่เมื่อ 7 มิ.ย. 2024
- Premium Bonds - The Nations Favourite Gimmick that will set you back £1,000s.
Looking for help with Financial Planning?
I am a Chartered Wealth Manager and Partner in a financial planning practice based in the UK. If you would like to find out more about working with us, please follow this link: go.novawm.com/getintouch
DISCLAIMER:
This channel is for education purposes only and does not constitute financial advice - James is not responsible for investment actions taken by viewers. Please seek out a regulated advisor if you require assistance (whilst James is a financial adviser, he does not provide advice through this TH-cam Channel, which is not affiliated with his employer).
James Shack™ property of James Shackell
Copyright © James Shackell 2023. All rights reserved.
The author asserts their moral right under the Copyright, Designs and Patents Act 1988 to be identified as the author of this channel and any video published on it.
00:00 Premium Bonds
1:03 How They Hook You
5:03 The Maths
8:21 What You’re Missing Out On
Thank you for the comments, clearly Premium Bonds cause a lot of debate!
To be clear, I’m not suggesting you should do away with an emergency cast fund and invest it. You should hold an emergency fun at all times, just make sure it doesn’t get too big. 👍🏻
The maximum holding in Premium Bond is £50,000. It is unlikely to cause an issue.
If you had invested £50k in Bitcoin 10 years ago, you would have £26,800,000 today. Fortune favours the bold.
@@sang3Etamore likely lost the lot 🙄
why not take the money you`d put on the euromils or national lottery, and put that into premium bonds each month, (lets say you do both games and both mid week and weekend you`re talking £9 a week) this would be separate to savings and investments. this can also be your emergency fund at the same time so lots of good reasons to do it. Then seperatley save and invest (ISA, stocks, pension) like normal, that`d be a win all round, right?
Grandparents are also more comfortable paying into premium bonds to grandkids, and like to track it. I would say, that it can be worthwhile as quick to get out, secure, and also useful if you've used the tax free allowance in an ISA
To be fair, my few thousand quid emergency fund held in Premium Bonds was outperforming any available savings accounts until we saw the base rate increases.
The fact this post has so many likes just confirms people must realy like these premium bonds.
So what’s the plan now?
@@JamesShack What's in there is staying put for now but I've not paid in any more for about 18 months since I setup a S&S ISA. I was a late starter to a pension so the bulk of my saving goes into that along with a regular payment going into the ISA each month. My saving journey only started during the post 2008 period of historically low interest rates so PB turned out to be right for me in that time but if I was starting today I would be looking elsewhere for more guaranteed results. So I do see your point.
I sold a house 14 years ago and bought £50,000 worth of premium bonds, over the years I’ve made an average return of about 1% per annum on my investment ! With my highest single prize being 100 pounds ! I’ve now put it all into a saver fixed at 4.2 % for 2 years, it wasn’t a difficult decision. Bonds are just not worth it anymore !
@@andy.m265 If you had invested 50,000 into an S&P 500 index tracker you'd have made over £100,000 in the past 14 years.
A great way of keeping the interest/winnings on £50,000 out of the way of the taxman. Definitely not a gimmick in my opinion.
The one thing James forgot to mention about Premium Bonds is they don’t pay any commission to advisers.
They invest your money in proper bonds with a defined rate of return, so they earn more than you invest - that is the commission. Plus you are losing the real value of your investment - i.e. inflation, which I calculate to be around 12% per year in. Thats £5k for every '50k invested'. These are invisible but real fee's.
@@jasonbuksh2958how are you calculating 12% inflation? What metrics are you using to bump up from cpi figures? Genuinely interested for future reference for myself. Thanks 🫡
I have met with financial advisors and they drone on about saving for retirement. You cannot predict if I will get there, many of my friends have not. My children told me to enjoy life and they do not care about any inheritance.
Yes I have premium bonds, they are fun. Yes, I buy lottery tickets and yes I am out of pocket. But I have something called enjoyment and you cannot put a price on that.
I predict you will be a rich man but when you die you cannot benefit from that.
I can guarantee if I consult a financial advisor it will suck away 95% of what little enjoyment I have in life.
I am not rich, but I have had, and still do have an enjoyable life. Some banker is not benefiting from my money though
Retirement is a scam to bleed your excess cash. You may never get there and if you do it's just a waiting room for death ☠️
I've recently sold our kids premium bonds, which were given by grandparents and invested the money into child's stocks and shares ISA's. Much better return for when they reach 18.
I was bought £10 of premium bonds in 1984 by my great grandmother when I was born. I found the little yellow card with the number on it a few years back, updated my details and checked how much I had. I still had £10 😂
Correction - you had 10 NEW pounds. Worth so much less than in 1984
Similar to my wife. She inherited £60 about 50 years ago, as bonds. Not a penny has been 'won' .
Part of the reason would be that you need to claim your winnings within 6 months or something, could be a year or whatever but there is a time limit
@@garyukdividendinvestor on premium bond there is no time limit. On the website you can check for historical prizes and mine still says no prizes and £10 worth of premium bonds.
@@frederickwoof5785 A hundred pounds or less is not likely to provide a win in your lifetime, even a thousand is going to provide wins quite infrequently.
National Savings Premium Bonds were first issued in 1956 not 1994 as stated.
Im 24 with 11k invested in premium bonds, won £200/300 this year alone, plus gives me something to look forward to each month
I've held them for a couple of years, my return is lower than the stated average, but it's not bad, and when you factor in the lack of tax it's pretty close to easy access rates. Plus it's a little bit of fun!
The reason i have Premium Bonds (PB) is because if i put £1,000 in a building society account and got £25 pa in interest, it's not going to make any difference to me.
With PB, I get the same return of £25, but i may win, say, £1,000+ which would be very handy. Plus, this stops me buying lottery tickets, which really is throwing money into the wind!
Good point about not buying lottery tickets - I've stopped buying all this year, as prize history ( for me) is pathetic!
May😂
Yes, losing £2 per week on the lottery has financially ruined many people! 🤣
I have twice as much in an ISA as i have in premium bonds. Premuim bonds have made 3 times more that the interest from my ISA.
I have a hard time seeing it as a gimmick.
Especially, when my mother, my Uncle also have premium bonds that are doing just as well.
If you’d put it in an etf you’d be so much better off :( savings accounts don’t even beat inflation.
I keep my stud dog’s fees in premium bonds and he’s made £100 this year, he enjoys his work and doesn’t want to retire.
Little fella has the dream gig
Having invested in Premium Bonds over the last three ears, I thought I must watch this video. Having watched it, I'm keeping my money in the bonds.
What are you reasons?
What are your reasons?
@@JamesShack I'm doing better than the returns you predict.
@@Rog5446 50% of people will do better than the median. If you play it long enough that should revert to the mean.
I think another fair use case is for a lot of people who have very little savings. If you have a couple of hundred quid in them, you aren't missing out on any meaningful interest as 3% of f all is still f all. Plus a million would change your life.
I agree with this. If you have very litter or are only just starting saving, it makes the whole process a lot more exciting. But once you’ve been doing that for a few years you have already formed the habit and can move on.
This is the lottery ticket fallacy
Exactly! 💯👍
This touches on points I was going to make.
1. Yes, getting significant returns on PBs is a lottery but there's another clue in the name: with a bond, you get your money back - there's no guarantee of a return but there is a guarantee that all you'll lose is due to inflation and during periods of low interest and low inflation, that's very little to lose.
2. People judge situations by their own standards - that's just human nature. People that are ready, willing and able to invest for the future, will normally have a secure income, low, or well managed debt and some surplus income that they can afford to invest for the longer-term. In other words, they can manage unplanned expenditure from other sources. @James, given your educational background, you know far more about this than I do but any form of saving/investment is about "deferred gratification". For people with only a small disposable income of a few pounds per week, that investment would return almost nothing until the growth is compounded over many years. With the lottery, or PBs, even with the tiny probability of winning, there is still the possibility of winning life-changing amounts of money, so people don't see it as a loss in the same way as locking away that same small amount of money for many, many years.
For the avoidance of doubt, I have done the lottery only rarely and never bought Premium Bonds; I only had a moderate income (below the 40% tax threshold) and could only afford to start investing on a small scale around 15 years ago, so I am most certainly not in the "high net worth" category, whatever that means in practice.
As a senior citizen (aged 70) I have £50,000 invested in premium bonds and they bring in a regular monthly income, I love them. They pay out far more than I used to get when I had the cash invested in an ISA. The only way I could get more of a return would be to invest in a more risky investment plan and tied up for a lengthy period, neither of which I find optimal for a person of my age.
but interest rates on isa’s back then was rubbish and now it’s far better. You would earn far more interest on even an instant access savings account. Just depends how much tax you pay.
Currently, if you are willing to tie up the money for one year, you can get over 6% with an NS&I bond and you can take the profit monthly or at term end.
@@johnwellbelove148I just bought one of these for my mum and they gave her 6.2% for one year. That bond has now been withdrawn by national savings, so it was only available for 6 weeks
NSL at about 6% pays interest monthly into your bank’s current account is a no brainer
@@azza1793 yeah i would've done that one if i didn't need access to the money, i went with Santander 5.2% easy access which suited me better. Both great deals and far outpay the premium bonds i had before 😂
I dont regret holding them though, was a lot of fun to check each month and got pretty lucky compared to average winnings
I like them. I use them basically as a Lottery ticket, that I can’t lose on. I’ll literally get my ticket cost back. I don’t use them as a primary investment source, just a bit of fun on the side.
I do too, but it’s not a free lottery, we’re paying for the tickets each month with the value of the interest we would have guaranteed received on the money if it was in a savings account. I’m with you tho, premium bond day is my favourite day of the month haha
Same
Agree. If you are maxing out your ISA and SIPP allowances, then Premium Bonds are perhaps not a bad place to keep an emergency fund or short term accessible cash for planned big spends
Very interesting perspective! Thanks James. Personally I like the use of premium bonds for an emergency fund store, with the spice of potential lottery winnings!
It definitely has a qualitative value that is hard to quantify.
If you buy a lottery ticket, the cash has gone. Premium bonds is available if you need some cash.
I win most months...over 500quid so far this year!
I put my emergency fund into Premium Bonds.
It definitely makes an emergency fund more exciting.
Interesting video, thank you. I keep £10,000 in premium bonds as an emergency fund but this does raise the thought of moving this to an easy access saving account for higher guaranteed interest returns on my money.
I put £20k in premium bonds and won £1,000 2 months later! Since then I've won an average of £550 per year. I guess I'm just lucky!
Best thing i ever did, putting my money in Premium Bonds, i have won something every month since i started with them many many years ago. Much more then leaving in the bank or having my money in any investments that could go down, which all the ones i was following did. Plus the easy access to them.
Yea my brother who has savings that he needs access to and he like you thinks there absolutely brilliant
Did you even watch the video😂😂 the government loves uneducated people like you
If you are a high earner and you need to save money for a house deposit, there is simply no other financial vehicle that allows you to save £50k and earn interest tax free. Unless you want to waste the ISAs allowance for storing cash.
Suppose a couple of years in a tax free ISA would be ok. But, you lose the possibility of a large win.
For me it's short term. Got 13k ish in high rate savings, keeping under £500 interest. Then £15k in bonds for tax free earnings. Yes it could be in an ISA but the difference in a short term is insignificant. It's only waiting there as an emergency find whilst we see out maternity leave and an upcoming remortgage. After that whatever is left will be hitting the pension!
We’re in the fortunate position to have retired 10yrs early last year. We have divested our savings into a mixture of 2yr fixed rate accounts, ISA’s, and Premium bonds, (which we’ve jointly maxed out) oh, and a separate private pension.
Presently the pension is performing the best because it’s RPI linked.
After that it’s the 2yr fixed rate at 4.5%, but because of the tax free status of the Premium Bonds, the Net amount is close.
However like other investments, past performance is no guarantee of future performance. But hey, they give us a nice little top up each month into our pension, and who knows one day we may do a little better.
I used to spend £5 per week with Euromillion Lottery, £260 per year, I don't smoke or drink coffee so that was my 5 minutes Happy Thought of "what if I win the Lottery?!?". Now I transitioned from saver to investor but I pay some £25 per month into the Premium Bonds and I park my travel budget for the year, so I can still have that 5 minutes Happy Thought but won't lose any money
I did the same. Around £20 per month on the lottery, with virtually zero chance of winning any significant amount.
I sporadically buy Premium bonds instead, the odds of winning may be slightly better than lotto, but at least I keep all the money I put in.
The most I've won is £25 (every year) with a small investment.
An important thing to consider with Premium Bonds, is the wait time before you are entered into a prize draw. If you invest during January, you will only be entered into March draw, so best to invest at month end.
So in your first 12 month period, you would only be entered into 11 draws.
This is more of an issue if you just want to park your funds there for a short period, this could tip the scales towards a savings account even for higher rate tax payers.
James - I've been debating this conundrum recently myself and thank you for the insight. Here's a coffee to go!
Only one person has ever been hit by a meteor in recorded history and the odds are 1 in 700,000 yet the lightning hits the earth on a daily basis but the odds are 1 in 5million. How does that make sense
I sold some of my risky stocks in September 2021 and I put that money to PB.
PB returned me only around 3% ...BUT...If I kept my money in those risky stocks, I'd be down 25-30%
My emergency fund is now in Barclays that pays just over 5% + and the rest of the money is in other accounts with 3 - 4.5%
I think PB can be good as a temporary holding until you actually need that money, let's say saving for a deposit. You don't want to risk that money in the stock market so you can put it to PB for a chance to win until you take that money out in 2 - 3 years to buy what you were planning to buy but I wouldn't use it as a long term savings account or as an ''investment'
I've maxed out my £50K in premium bonds as a safe, quick access fund with benefits. Last year I got 3.2% back, tax free, and the thrill of maybe getting a big prize. I've also got ISA, Pension, stock options as my ongoing long term investments.
How much was 3.2?
@@XY4ZX 1600
@@XY4ZX £50k x 3.2% = £1600
Have always only done the lucky dip occasionally anyway on the national lottery - Once people start using their lucky numbers they psychologically feel forced to do it every week in case their numbers come up - I'm not really into gambling.
You recommend a 60/40 fund in this video. Could premium bonds be a suitable replacement for the 40 part? I.e. you manually invest 60% of your savings allowance into a simple cheap index tracker, and 40% into premium bonds?
I'm in the situation of having sold a house, but renting until I buy the next house (moved quite a distance, so wanted to scope out the area before committing), and having to put the several six-figures of future deposit across many different savings accounts (all under £85k) and an ISA. CHIP might be 3.55% but as you point out, it's really 2.1% after tax, and that's the best there is (although the app is nice). Another issue is that it has to be instant access, in case a house does come up, so the better fixed rate offerings are out of the question. So I stuck some into Premium Bonds, and this is where I learned something - you don't get entered into the prize draws until you have had that investment in for a full calendar month - so it's useless for very short term savings as well!
But you aren’t going to buy a house in 30 days so might as well try all hands? Put some in premium bonds as well?
Thanks for another great video James. Could you please consider doing a video on building and managing a cash buffer for and during retirement?
PBs work for me as a place to park my emergency fund. All wins are automatically reinvested. But, as you said, sensible to keep any eye on the value so I don’t have too much parked there. For me it’s part of my overall savings plan, but not a significant proportion of it.
Interesting video James, definitely food for thought. I don't currently use Premium Bonds but did have a PB account many moons ago as a teenager...I wasn't winning anything so reverted to a cash ISA instead 😂
Nice, thanks for the info. At one point you mentioned a portfolio with a 40/60 split in shares and bonds, where would you get something like that from and would you have to create it yourself? Cheers
This is why I do both: the majority of my savings go into index funds (S&S ISA), but I still put a little bit each month into Premium Bonds.
Currently getting over 6% so seems good value to me
I'm sitting just below £100k income, so anything extra I earn is taxed at a 62% marginal rate due to loss of personal allowance. Premium Bonds winnings don't count as income and aren't taxed, so I currently have my emergency fund cash savings in them. I win something most months and the effective rate I get is higher than I'd get in an instant access or notice account that is taxed (and I've already used my £500 personal savings allowance and that money still counts as income anyway so takes me into a higher tax bracket). I already max out my stocks and shares ISA with £20k per year and already have plenty in my pension.
That is why my emergency fund is in premium bonds.
This!
In this situation Premium Bonds are very tax efficient. Especially if they can keep you below £100k. Even savings income that falls within the personal savings allowance counts towards the £100k limit and the tapering of personal income tax allowance.
@@JamesShack Yes I lost a small amount of my personal allowance last year because I forgot personal savings allowance would count as income and it took me over £100k. I've adjusted things for 2022-2023 tax year to avoid this.
@@owensmith7530 The tapering of the allowance is a nightmare. Just drop the 45% rate to 100k, remove the complexity, and remove the ridiculous marginal tax rate. I'm just about to hit it too, would rather just have a higher rate from the get go than this. Still, as a pension fund encouragement instrument, it is effective.
When is a W-8BEN form required to be completed? If someone owns index funds that contain US companies, does it make sense to complete a w-8BEN form?
Thanks!
Its the tax free nature for me
That and the option of dipping into savings in an emergency without being penalised!
@@VL-qy4fc Most easy access savings accounts would let you do this however (at least once)
@@Dr.JubairsFinance indeed, but if you're a higher rate taxpayer, and have a decent rainy day fund (>£20k), the net return on PBs is likely to be better. However cash ISAs exist with decent rates and instant withdrawals. I think some people need that what-if factor to have something to dream about, and PBs beat the National Lottery in that it's not throwing money away, just interest - which until recently has been dire on savings accounts anyway.
@@grahambriggs8338 and some people max out their ISA, have enough in an instant access savings account to max out the tax free allowance and want somewhere to park the extra tax free.
@@lonyo5377 Yes precisely, lots of people max out ISAs and a Cash ISA is not a great option for them
An excellent summary of the mathematics and psychology of Premium Bonds.
I put into premium bonds what I used to put into the lottery because you get to keep your stake, it's just one part of my savings portfolio.
I sort of agree, but not completely. If you have enough savings elsewhere so that you are going to pay income tax on the interest, then the tax free status of PB is a distinct advantage (assuming that your limited annual ISA allowance has been consumed). At the miserly savings rate of my bank, the recent rate increases means that I will exceed the nil rate interest allowance. The fact that they are 'safe' since they are government backed securities is also a bonus if your savings elsewhere exceed the £85k guarantee.
Ignore the high value prizes, since they are unlikely to turn up in one lifetime - the steady stream of smaller prizes make it worth considering. Over the last decade, I did win £1k once, and £500 once.
Thanks for the comment Robert, as you probably from the rest of the video I agree with your comments.
They've been around longer than I have so definitely well before 1994. I had about £20k in them and would win 2-3 times a year... only the £50 but better than a high interest account at the time and it got me into a saving habit that was fairly easy to tap into when I needed a deposit for my first home.
NS and I is such an excellent run UK service. I love premium bonds.
With bank failures, I like it's Government backed so therefore it's a reasonable place to park my emergency cash.
I'm a big fan of mathematics and appreciate the difference 1% can make over the long term so I'm with you in principle. Since I quit my job as a teacher I no longer pay tax on a PAYE basis so PB is where I keep my tax money and my emergency fund! Volatility is something I can live with for the potential to win £1000000. Sometimes it's less. Sometimes it's more. Obviously 90% is invested elsewhere (property, S&S ISA, gold, BTC, ETH etc) but it is nice to have Jim Carey's optimism!
My attitude to Premium Bonds is simple. If the chances of winning are 24,000 to 1, then it's pretty clear that you have to have 24,000 or more of them. This is what I have and have had for some time. There are very, very few months when I win nothing. And I sometimes win more than the basic £25 on a bond.
James talks about the situation now when conditions are becoming more attractive to savers. But for a number of years recently interest rates for savers were extremely low. Compare James' figure of 2.5% average return for 25,000 premium bonds to the rate of interest on my HSBC savings account which for quite a while was at 0.01%. And then add the thought that perhaps, just perhaps, you might one day win more than £500 (my highest wins so far) on a premium bond.
You can't put a value on fun. And how many investments are fun?
Love them or hate them - Premium Bonds are a far better 'gamble' than the Lotto or Euromillions. At least you get to keep your original stake, but yes - the returns are pretty crap, unless you have the max allowance - and a little luck to boot!
Hi James, are you suggesting that Emergency Funds (£10k+) not to use premium bonds but an easy access account instead?
1 in 700,000 for a
Meteor crush simply cannot be right. That would mean 90+ people in the U.K. die from meteor strikes every year.
Definitely will need a source for those odds.
A great place for your emergency fund old boy. A tad melodramatic one feels.
Great point of view James. It’s all about priorities
i currently spend £20 on the lottery, should I put that into premium bonds instead? is it a good place for an emergency fund ?
Does this have anything to do with Financial Advisers not being able to earn commission on premium bonds 🤔
What an excellent video, well presented, clear and informative, thank you.
If I want to move funds from my Premium Bonds to my Vanguard pension should I do it gradually or move a lump? Also will I get the tax back when I pay in it it originates from premium bonds?
Thanks you taught me alot I didn't know.😊
James, where can I go for sound financial planning such as yours? I need a consultation, I think…
Good solid info again, thanks. You deserve more subscribers, people are missing out on valuable insight by not subbing.
Thank you!
I agree with this message - the only reason I'm currently holding is I'm a FTB'er and looking to buy a home thus can't invest it all as I need it in the shorter term for my deposit.
One of your examples uses 55k and the maximum PB's you can have is 50k
Excellent explanation of the subject sir
I put my emergency fund in premium bonds. I still have ISA, LISA etc.
You say premium bonds were launched in 1994, but they started in 1956.
Great videos.
Yes, I got that slightly wrong. They only started doing the £1m winners in 1994z
My brother & I inherited some prenium bonds from our Dad, which won £25. We were disqualified from collecting the prize because we had not tranferred them from the estate in time.....😕
50,000 invested and it does ok, winnings overtook banks interest, now maybe not so, will be keepi g an eye on it
I managed to get a uk bond for my mum, fixed at 6.2% for one year...shes 75 so the markets are not an option. Shes just about to buy 15k of premium bonds, but if there are a few prize wins, she'll be happy.
Ive tried to explain that inflation is eroding the gains but at 75, she isnt interested in chasing higher percentages
I am a big fan of our content but I was particularly interested in this one. I am one of those addicted by the Premium bond fix and have £50,000 invested. The reason I have so much is when I had only £5000 i won £5000 and this was a time interest rates were so low so I moved a lot of my money into premium bonds. I have only won modest amounts since. Also I just checked the FTSE 250 and over the last 5 years the index has gone down. I still completely agree with your video and will be looking at reinvesting my premium bonds.
If your looking for a stock market comparison I would use a global index rather than the FTSE 250. The MSCI All World is up about 50% over the last 5 years.
As many others, I use mine for emergency fund. Can you make a video on financial strategy as the sole family bread winner please? Two thirds of my salary is spent on household expenses. Cheers
I’ve had bonds for over sixty years and never won a penny . So I contact them and they said “ all that old bonds where deleted form the list some time along and the money is now lost , under the old issue , Sorry”. It seams that a huge amount of Scottish bonds have just disappeared, it happened back in 2011 so I’ve been told.
I have had £5 worth since 1956. I won £50 some time in the 1980’s. I guess there’s no more point keeping trying to get myself to write to ask about them. Is it legal though for them to delete people’s money like that?
If you haven’t got tens of thousands of pounds worth
There’s no point
Very interesting article. I recently had over 26K in premium bonds and over two years I have won £450. I cashed in 21K in July 2023 and invested 16K in a fixed term cash ISA paying 5.4% and 5K in a fixed rate bond paying 5.22% both paying me a monthly sum of £94. That's like winning on a premium bond every month and the bank I used (Halifax) enter me into their monthly prize draw where they pay a top prize of 100K and 1600 smaller prizes , so I think what you are saying makes a lot of sense. I still buy £25 premium bonds every month on a standing order just for the fun of it. I will be prurchasing in the near future a two year fixed bond with the rest of my premium bond money.
Not joking, I looked at the Halifax draw about 15 minutes ago, thanks for the product ideas (they're going to think we work for them 😂).
Just checked my last six months' results and I've averaged just under 5% annual return. Considering I pay zero tax on the gains instead of 45% if I put them in a normal easy access account, this seems pretty good to me. What rate would I need to get from a normal savings account to match this, taking tax into account? 7% ish?
Absolutely agree and I have always thought so. Nonetheless I keep the minimum £25 balance in there for the infinitesimally small chance of winning something.
As with others.. My emergency fund is in premium bonds.... Also... small typo at 8.48 .. Should be £50k, not £55k.. Good video though James... Deffo worth making people rethink their value.
I'm actually the opposite. I have money in a 3.25% savings account (~£35k) and I am also an additional rate tax payer. It seems that I would be better off putting that money into Premium Bonds, but the "luck" aspect of the returns puts me off.
Interesting, thanks for sharing.
For an emergency fund though you're aiming for safety, not returns. And you ignore the pleasure of the potential wins, which people enjoy and has a value (maybe not for you though). Rather not pay more tax than I have to, so PB it is for me as a fellow additional rate payer.
BTW the gamblers fallacy you mention is countered by simple probability maths: the more times you play, the more likely you are to win (0.00001% add 0.00001% add...). But, the more you play, the greater the magnitude of money you give to charitable causes say 52:48 and not returning back to you as winnings. However I do agree, the lottery is an utterly pointless, hopeless game that exploits.
I would just add, not mentioned in your video than when interest rates are incredibly low, it's a good time to put money in premium bonds.
It is a very low maintenance saving scheme. No fees attacking my savings. Winnings far out weigh bank interest paid. Oh, and my son won £500 last year with £200 worth of bonds!
So what Savings product high interest savings account paying 4% + would you suggest investing 10k into bearing in mind I have already used my 2023/24 ISA allowance for the benefit of all viewers ?
Hi James, do you still share your cash flow spreadsheet you shared some time ago?
Let’s hope this one doesn’t have a big black screen in it!
hit by a meteor odds seem wrong.
@@cleric7788 I know. I was a little surprised when I saw that.
One of the winners of the million this month had only had theirs for 10 months.
As a higher tax payer, I rather the risk of losing a few quid on my emergency find
@@JamesShack I think you are a few orders of magnitude off? The US NRC says an average of 91 people die per year worldwide from meteor hits which is the equivalent to a 1 in 85 million.
If your stat is correct, it would mean 11,000 people die each year from meteor hits worldwide, or 95 per year in the UK alone. Which feels like too many for no one to talk about it!
@@davidt.9578 I think some stats include the fact that there have been big events every 1000+ years that have killed a lot more people. The extent of my research was Googling “Things that are more likely to happen than winning the lottery” and it’s on most of these lists somehow!
Good presentation that's balanced (and includes tax implications).
I think the only thing unsaid was that the government guarantees 100% of the amounts with NS&I, so might make it a good place to stash emergency cash (subject to inflation) in a form that's easy for an Attorney to access. Of course, this is if financial circumstances push you there after tax is considered.
Another little nugget I remember from somewhere is that the NS&I organisation only has authority to offer returns in the THIRD quartile ... so any NS&I product is automatically damned to fall below the mean return offered for cash.
But, of course, its the 'fun of the chase' ... and back to your arguments.
Thank you.
Well the government also guaranteed £85k of savings with regulated banks via the FSCS protection scheme. So there’s not much in it.
But yes, it is fun… that’s hard to deny.
I've won more in one month on the premium bonds than I have on the Lottery in 3 years. So for me its definitely worth the investment.
NS&I do guarantee all your money not just up to £85k. They have some decent online products.
That is true, but given that you can only put £50,000 into them it does not give you much benefit.
The £5 of premium bonds bought for my brother and I in the early 60s are still waiting to win anything. However, a similar sum invested for my friend Neil and his sister Heather won £25k a few years later, which bought them a house each when they reached 18. I think that it was a thing sixty years ago to give a young child.
Makes a lot of sense James. I’ve had £50k invested in premium bonds for a few years and enjoyed receiving a small win each month when interest rates were very low, but now that bank interest rates significantly exceed the likely 2.55% return, it makes sense to move the money somewhere it will work harder. I already have a considerable amount in shares and bonds and think there is still considerable uncertainty ahead in the markets, so I’ll be moving my premium bonds into 6 and 12 month fixed cash savings at well over 4%. If inflation comes down as fast as the PM hopes then I should about break even, if not, and there’s a recession, then I’ll have kept my losses a bit lower as I watch my existing bonds and shares fall.
Yeah as long as the banks dont go bust and take it with them
Good point. I’ll ensure I’m within the £85k compensation limit in any bank. Now, what about Pacific Western 🤔😉
@@maxpower1797U.K. bonds max investment is 50m and is U.K. gov backed
@@davidclark9973David
Just make sure you don’t save up to much
You can’t take it with you when you die
And most people who are savers , die leaving far to much money
Another brilliant video James, agree with you entirely keep them coming! 👍😁
You're quite right, during the last year my emergency 2k premium bonds have crept up to over 7k. Thanks for another great video James.
Kept starting to write comments until I realised "unless you're a small segment of the population..." - yep, that's my reason - also instant access.
Also, this month is the million. I can feel it. I BELIEVE. IT'S MY TIME!!!111111!!!!!
Excellent video and confirmed what I have thought all along
I did stick the maximum in when I was between houses and did not want to lock my money up, so my ex and I had 100k in bonds when we cashed them back in 9 months later I'd got the same return as the average they promised but yeah you'd be mad to leave substantial sums in for long.
most people i know retiring today have done so on the back of housing which wasn't even their investment just handed to them through inheritance. the rentier generations after them will at some point will either give up or fight. You have an email from Ernie he says the government will pay out even if the FSCS wont!
I have help premium bonds since 1970 . Did you say James they were introduced in 1994 or am i mis hearing ? Really enjoy all your talks am learning a lot
No interest, but the capital is always safe, less inflation. I have £5,000 in Premium Bonds and regularly receive a prize, so far working out annually at 7.2% interest.