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!
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 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+
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
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 have heard it all before but did enjoy the way you presented it. For me Premium Bonds are my emergency cash fund due, as you said, to the tax free return. Once I have 20k in my ISA each year then spare cash goes into bonds.
And it's all at risk enjoy the rest of your life being poor by the day no one understands that you have a counterpartie and when we have another crisis which is going to be 2008 on steroids banks are insolvent no deals no loans and no deposits get ready for the banking bust by design you'll own nothing and be happy
8:17 Damian this is one of the most important things I have ever heard you say that I don’t think a lot people understand it! Could you cut this into a short to expand its reach!! This I feel aligns with your purpose/goals 😉
The instant access is also a big plus. It's where ive stashed my deposit for a first home and Im getting better returns than with instant access savings accounts. With the unrealistic caps on help to buy it seemed the best way to go.
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!
Finally, someone from a younger generation than myself giving good quality investing advice. Keep it up mate…loving the “out and about” style of video too, it’s a good concept, makes everything feel like a mini documentary rather than someone sat in a boutique studio rattling off shite…that’s when the viewers attention span falls off, keep up the good work pal💯👍🏻
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.
Superb explanation, I have a tiny £500 in premium bonds I've had for a while but I've wasted untold amounts on the lottery. Will follow your suggestion and pay into my bonds instead.
I agree completely it’s not an investment and with inflation you lose a little but I still do it. Have you done a video on trading 212? They pay interest on any uninvested cash but your money is invested in a financial product so doesn’t get the fscs financial protection. I opted out
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.
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.
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.
I had Premium Bonds since I was a kid in the 90's. Not once did I win any amount. I had forgotten I had my bonds until last year, then I hit up NS&I and sold them. I walked away with £1800. That's £1800 that had sat there NOT accruing interest for almost 3 decades.
Do you know if that was the original amoun? Going that far back any winnings would most likely have been posted to you. I know from the web dashboard you can choose to automatically pay back into and buy more PBs now but don't know if the same was the case going further back.
@@RealFahrenheit that does suck then I wonder a little if they've managed to computerise everything entirely successfully at times. It must be a headache having damn near 70years of info with a huge amount of it having been transferred from paper copies
I got £1,500 last year on the full £50k. For me it's the best place for my emergency fund and I am happy to "pay" for a bit of spice each month when the draw comes around. You never know your luck 🤞🏻
@@markwilliams4274 If you hold the maximum £50k you have to take the winnings. If you hold less than that you can build your bond total or take the winnings.
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.
Great video. I'm with you on this one. I wouldn't invest in PBs. My family love them though. They like the occasional joy of finding out that they've "won" something. I was trying to convince my dad and sister that I only hold on to my old £100 premium bond (the physical piece of paper) from the 1980s for sentimental value. I don't think they understood but such is life!
There is also the psychological element that encourages people to save. The payout may be nothing but the value not burning the cash has value, what that exactly is is difficult to ascertain.
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
I treat them as a bit of fun each month. I even get excited if the doorbell rings around the end of the month, thinking it might be the Premium bond man/woman. Plus, we open the prize app on 2nd day of each month to see what prizes my partner and have won and celebrate. In June we won over £1000 and between us average about £250p.m in the past year. I know full well the prize rate will decrease, but are fine with PBs atm. I never get excited about getting the guaranteed interest in my other accounts.
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.
put it this way spend a £1. On lotto and it's gone wbut save those pounds up and buy premium bonds then you've a chance of winning something or cash them in and get your money back
Great video again Damien. The editing and story telling was brilliant. I think you could have talked more about the entertainment factor of them which you touched upon at the end.
@@DarrenSmith-tq2xz But not as less as a non ISA savings account and even less less than a stack of £20s. Yes you could have invested the money in Nvidia or FTX. Hard to choose isn't it ?
@@MrDuncl no one is talking about counterparty risk at the moment and having capital in the bond markets is a risk of going broke its up to you what you do with your capital just remember that it is at risk if the other party defaults and when this happens in my opinion based on facts then no one can complain about it and say that they weren't worned all stock markets are way over valued and we will see a 80 percent correction at some point and then they will be gunning for people who told them it was safe and sound look at the global debt it can never be paid back have you heard of the dod Frank act if you haven't I surgest you Google it
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…
Great video! Your videos are getting better and better, and they were already good. I have kept a part of my emergency fund in premium bonds for a few years now. Never won anything, but the attraction is that I won't lose my capital. It's highly liquid, plus there is a very small chance that I might actually win something .
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
I’ve maxed out on premium bonds as my emergency fund. My money isn’t at risk, I get quick access to it if I need it like if I lose my job or my boiler explodes, etc. it gets more return than my savings account and there’s always the chance of a decent win. I don’t class it as an investment. I have a pension and isa account for that. In 33 draws, I’ve failed to win a prize on 4 occasions. I’ve averaged 5.2% overall.
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%
I guess they’re an OK option if you’re fortunate enough to have maxed out your various savings allowances and ISA’s and still have some money to put away tax free.
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
Excellent video as always! I do love premium bonds but I am considering moving my money into a savings account, Three of my family members won nothing this month and pretty sure they have the full holding! Also out of curiosity when you phoned customer services was the first answer a AI chatbot?
They are a great gateway product. Growing up all I really understood were savings accounts (with terrible interest rates) or the lottery/ gambling. Premium Bonds are a good way to get your man on the street who might be making “bad” financial decisions to start exploring the wider world of investment products. It’s an easy sell that instead of spending £50 on lottery tickets, you buy £50 on premium bonds instead - it still tickles the same thrill, but your ticket gets entered every month and you can always redeem your initial capital
I saved my house deposit in bonds as i was unsure when i wanted to buy and also the quick access without being penalised. I gained more in winnings than any savings account would have earned.
Premium Bonds are my fave place to have my emergency fund! Plus I’ve won over £400 in the past year on just under £2500 of premium bonds. Also I just love the excitement of the month around draw time! 😂
Savings are not just for future consumption. They are also for peace of mind, e.g. so that you can cover an unexpected cost. For many, this is worth paying a small %
As a young person just starting out my savings/ investment journey is this something I should be saving into or should I start off with S&S ISA’s going into index funds? Any advice would be greatly appreciated!
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.
Love your vids & PB's . Win a bit most months & do get upset when I don't get anything. For a " gambler" like me, they are great. A win win. My pension is just into the lower tax bracket, but I've heard on top of your personal allowance (£12570 ), there is a starting savings rate ( £5000 ), which, with the personal savings allowance ( £1000 ) = £18,570 before paying tax? Can you verify & if so, mention it when explaining tax implication on low income earners. Keep up the good work.
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.
Reason I hold Premium Bonds, is because I love the thrill of knowing I have (a tiny) chance of winning big. I use the money I'd otherwise be spending on Lotto tickets. I know it's not an effective investment alone, but it slightly balances the high risk of my stocks and shares ISA, and means I'm not loosing money playing the lottery.
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.
Something sort of touched on but massively explored is the idea that once the money you can spend on the lottery or premium bonds is sufficiently small compared to your wealth, the more worth playing is. After all, if it makes negligible difference to my life (another fifty quid here, or hundred quid there) - then why wouldn't you play the lottery/max the premium bonds out? Got to be in it to win it, and the cost for someone rich enough is essentially negligible.
It's not something you can really compare to the lottery though since those tickets are lost money while the PB you can simply withdraw at any time. The lottery is a waste of money, PB is a decent investment with a dream of winning big.
@@intruder313 The point I was making is: the richer you are the less true the statement "participating in the lottery is a waste of money" is. The more money you have, the less impact the cost of a single ticket has on your life.
My son has a fair amount of premium bonds for a 6 yr old, every time we think of switching to an Isa he gets a premium bond win. In the last 12 months hes won around £300, which is a around a 10% return on his holdings, me on the other hand, i have very little at 46 and havent won in years. as long as h'es winning I dont mind, its his future house deposit etc.
1:04 I think you are being generous with the governments intentions there, the money they get from NS&I is used to feed the national debt, they must have known most people wouldn't purchase Gilts so gave them these instead, currently at below BOE base rates.
Good place to park cash with instant access and no tax implications. Sometimes convenience is more important than scraping every last drop of interest.
I had some money from my parents to use on a deposit for a house. It was about £5k and I left in premium bonds for a year whilst I found a house and got the rest of the deposit together. It was Covid so I didn’t want to get a draw down from market exposure. I didn’t get a single win. Not a single one in a year. I’ll not be touching it again.
is it as lucrative as the stock market? no is it as risky as the stock market? no is it as safe/liquid as if you deposit you money at a bank? yes do you get more money (statistical) out of as on the bank with normal interest? yes this alone would answer IMO the question ^^ and im a german and we have sadly no thing as this but yeah they are a good "investment"
Market highs can sometimes be followed by corrections, but predicting the timing and extent of it is challenging. I've heard some analysts talk about a 'massive' correction. It makes me wonder if it's time to adjust my $2M portfolios or maybe even consider some defensive investments.
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.
The only time they ever make sense is if you have maxed out the pension allowance and your ISA and you kids ISAs and have nowhere else to put money and even then....they don't really make any sense 😂
The only reason I am maxing out my pension is that I am 61. Premium Bonds made far more sense when I was looking to buy a house fifteen years ago, although I am back at the maximum so get a random bonus appear in my current account most months.
Totally agree and don't forget your kids SIPP. You put in £2880 and the government add another 20%. Invest it in a tracker fund and hopefully it will help them when you are gone and help them to start investing earlier than later as I suspect they may not get a state pension.
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.
I put in £500 each for my two kids into premium bonds about 14 months ago they have won nothing yet. However I am just leaving that there for them until they are 18. Just a token amount giving them a chance to win lol. I have already written this money of if it grows that’s a bonus.
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
Agreed good place for emergency funds and instead of doing the lottery. I just did the calculation for my winnings and I am getting £191 per month average so far.
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
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.
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 🤣🤣
ruclips.net/video/BpRZSPNZY7w/видео.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.
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+
The production value on these videos is really starting to show, love the content keep up the good work.
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
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 have heard it all before but did enjoy the way you presented it.
For me Premium Bonds are my emergency cash fund due, as you said, to the tax free return. Once I have 20k in my ISA each year then spare cash goes into bonds.
Make sure you pump your SIPP to £60k max before you do! You can spend a SIPP on commercial property, gold bullion at the royal mint, stocks share etc!
@@nikoc3585 That locks it away until you hit retirement age though. If I have a crisis then premium bonds are an easy access option.
And it's all at risk enjoy the rest of your life being poor by the day no one understands that you have a counterpartie and when we have another crisis which is going to be 2008 on steroids banks are insolvent no deals no loans and no deposits get ready for the banking bust by design you'll own nothing and be happy
8:17 Damian this is one of the most important things I have ever heard you say that I don’t think a lot people understand it! Could you cut this into a short to expand its reach!! This I feel aligns with your purpose/goals 😉
The instant access is also a big plus. It's where ive stashed my deposit for a first home and Im getting better returns than with instant access savings accounts. With the unrealistic caps on help to buy it seemed the best way to go.
Have you considered a LISA?
@@schopesonline I live in London, so it's the same threshold
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!
Finally, someone from a younger generation than myself giving good quality investing advice. Keep it up mate…loving the “out and about” style of video too, it’s a good concept, makes everything feel like a mini documentary rather than someone sat in a boutique studio rattling off shite…that’s when the viewers attention span falls off, keep up the good work pal💯👍🏻
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.
Superb explanation, I have a tiny £500 in premium bonds I've had for a while but I've wasted untold amounts on the lottery. Will follow your suggestion and pay into my bonds instead.
I agree completely it’s not an investment and with inflation you lose a little but I still do it.
Have you done a video on trading 212? They pay interest on any uninvested cash but your money is invested in a financial product so doesn’t get the fscs financial protection. I opted out
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 😉😂
This is so weird, I was going to comment on your next vid asking your opinion on premium bonds! Always giving us the content we need!🧡
I think the original problem was referring to this "investment" as "bonds."
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.
That merge at the end from voiceover to continuing the sentence outside NS&I was smooth... didn't go unnoticed!
💁🏼♂️
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
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
I had Premium Bonds since I was a kid in the 90's. Not once did I win any amount. I had forgotten I had my bonds until last year, then I hit up NS&I and sold them. I walked away with £1800. That's £1800 that had sat there NOT accruing interest for almost 3 decades.
Do you know if that was the original amoun? Going that far back any winnings would most likely have been posted to you. I know from the web dashboard you can choose to automatically pay back into and buy more PBs now but don't know if the same was the case going further back.
That is sad. If you got even 5% on that each year and reinvested, you'd be looking at over £6000.
@@Al_Does_Stuff yeah, I've got the original paper documents from when my Gran bought them for me. It's the original amount.
@@JHA854 that's exactly what I said that to my dad when I cashed out. Based on my experience alone I couldn't recommend Premium Bonds to anyone.
@@RealFahrenheit that does suck then I wonder a little if they've managed to computerise everything entirely successfully at times. It must be a headache having damn near 70years of info with a huge amount of it having been transferred from paper copies
I got £1,500 last year on the full £50k. For me it's the best place for my emergency fund and I am happy to "pay" for a bit of spice each month when the draw comes around. You never know your luck 🤞🏻
don't buy spice, it is an addictive drug and many people end up on the streets.
Do your winnings compound over the years or are you forced to cash out your winnings.
@@markwilliams4274 If you hold the maximum £50k you have to take the winnings. If you hold less than that you can build your bond total or take the winnings.
But 50k in a 5% savings is £2500
@@thehallstar4642 yes it is but you will then have to pay 40% tax on that.
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.
Great video. I'm with you on this one. I wouldn't invest in PBs. My family love them though. They like the occasional joy of finding out that they've "won" something. I was trying to convince my dad and sister that I only hold on to my old £100 premium bond (the physical piece of paper) from the 1980s for sentimental value. I don't think they understood but such is life!
There is also the psychological element that encourages people to save. The payout may be nothing but the value not burning the cash has value, what that exactly is is difficult to ascertain.
And to Damo's videos I say... Alright alright alright!
HAHA YES! love this.
Lotto= idiot tax
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
I treat them as a bit of fun each month. I even get excited if the doorbell rings around the end of the month, thinking it might be the Premium bond man/woman. Plus, we open the prize app on 2nd day of each month to see what prizes my partner and have won and celebrate. In June we won over £1000 and between us average about £250p.m in the past year. I know full well the prize rate will decrease, but are fine with PBs atm. I never get excited about getting the guaranteed interest in my other accounts.
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?
put it this way spend a £1. On lotto and it's gone wbut save those pounds up and buy premium bonds then you've a chance of winning something or cash them in and get your money back
Not for the individual - but great for the government
Great video again Damien. The editing and story telling was brilliant. I think you could have talked more about the entertainment factor of them which you touched upon at the end.
I have £50k in premium bonds and on average I get over £200 a month so I don’t think that’s too bad
One of the Premium Bond leaflets had a great summary on the front.
"Win £1,000,000. Your money back if you don't."
Your capital is becoming worth less and less
@@DarrenSmith-tq2xz But not as less as a non ISA savings account and even less less than a stack of £20s.
Yes you could have invested the money in Nvidia or FTX. Hard to choose isn't it ?
@@MrDuncl no one is talking about counterparty risk at the moment and having capital in the bond markets is a risk of going broke its up to you what you do with your capital just remember that it is at risk if the other party defaults and when this happens in my opinion based on facts then no one can complain about it and say that they weren't worned all stock markets are way over valued and we will see a 80 percent correction at some point and then they will be gunning for people who told them it was safe and sound look at the global debt it can never be paid back have you heard of the dod Frank act if you haven't I surgest you Google it
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😂
Great video! Your videos are getting better and better, and they were already good. I have kept a part of my emergency fund in premium bonds for a few years now. Never won anything, but the attraction is that I won't lose my capital. It's highly liquid, plus there is a very small chance that I might actually win something .
Had £300 for 15 years, never won a penny so cashed out and parked it somewhere with more predictable returns.
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
Damo on location. Love it!
I’d totally forgotten premium bonds existed!
I don't know about others but I have definitely got a better rate of return from premium bonds, than I would have if I had kept it in the bank.
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
Thank you! Fascinating analysis. After that I think I will put money into a high interest savings account. And forget PBs
Glad you found it useful!
I’ve maxed out on premium bonds as my emergency fund. My money isn’t at risk, I get quick access to it if I need it like if I lose my job or my boiler explodes, etc. it gets more return than my savings account and there’s always the chance of a decent win. I don’t class it as an investment. I have a pension and isa account for that.
In 33 draws, I’ve failed to win a prize on 4 occasions. I’ve averaged 5.2% overall.
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%
I guess they’re an OK option if you’re fortunate enough to have maxed out your various savings allowances and ISA’s and still have some money to put away tax free.
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
Excellent video as always! I do love premium bonds but I am considering moving my money into a savings account, Three of my family members won nothing this month and pretty sure they have the full holding! Also out of curiosity when you phoned customer services was the first answer a AI chatbot?
They are a great gateway product. Growing up all I really understood were savings accounts (with terrible interest rates) or the lottery/ gambling.
Premium Bonds are a good way to get your man on the street who might be making “bad” financial decisions to start exploring the wider world of investment products.
It’s an easy sell that instead of spending £50 on lottery tickets, you buy £50 on premium bonds instead - it still tickles the same thrill, but your ticket gets entered every month and you can always redeem your initial capital
I saved my house deposit in bonds as i was unsure when i wanted to buy and also the quick access without being penalised. I gained more in winnings than any savings account would have earned.
Premium Bonds are my fave place to have my emergency fund! Plus I’ve won over £400 in the past year on just under £2500 of premium bonds. Also I just love the excitement of the month around draw time! 😂
Savings are not just for future consumption. They are also for peace of mind, e.g. so that you can cover an unexpected cost. For many, this is worth paying a small %
As a young person just starting out my savings/ investment journey is this something I should be saving into or should I start off with S&S ISA’s going into index funds? Any advice would be greatly appreciated!
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 just checked.
I got a return of 2.9% from premium bonds in the last year.
When interest rates were 0 PBs paid 1%.
I'm not complaining.
Love your vids & PB's . Win a bit most months & do get upset when I don't get anything. For a " gambler" like me, they are great. A win win. My pension is just into the lower tax bracket, but I've heard on top of your personal allowance (£12570 ), there is a starting savings rate ( £5000 ), which, with the personal savings allowance ( £1000 ) = £18,570 before paying tax? Can you verify & if so, mention it when explaining tax implication on low income earners.
Keep up the good work.
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.
I put in the full £50k 3 months ago. In Jan I won £225 and in Feb I won £325.
They’re haram bro. Interest and gambling in one lol
I hadn’t heard about Premium Bonds in years. My Nan from Barnsley gave me and my brother one when we were born. No idea what happened to them.
I’m in exactly the same boat. I went on their website a couple days ago after seeing some one else’s video and now im struggling to get access
I lost access to my account but you can call them and get it reinstated
This happened to my wife. She had to chase. Wasn't easy. Anyway no wins in 39 years.
You have shed some light this this topic. Thank you
Reason I hold Premium Bonds, is because I love the thrill of knowing I have (a tiny) chance of winning big. I use the money I'd otherwise be spending on Lotto tickets.
I know it's not an effective investment alone, but it slightly balances the high risk of my stocks and shares ISA, and means I'm not loosing money playing the lottery.
My Stocks and Shares ISA always seems like a far bigger gamble than Premium Bonds.
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.
Something sort of touched on but massively explored is the idea that once the money you can spend on the lottery or premium bonds is sufficiently small compared to your wealth, the more worth playing is.
After all, if it makes negligible difference to my life (another fifty quid here, or hundred quid there) - then why wouldn't you play the lottery/max the premium bonds out? Got to be in it to win it, and the cost for someone rich enough is essentially negligible.
It's not something you can really compare to the lottery though since those tickets are lost money while the PB you can simply withdraw at any time.
The lottery is a waste of money, PB is a decent investment with a dream of winning big.
@@intruder313 The point I was making is: the richer you are the less true the statement "participating in the lottery is a waste of money" is.
The more money you have, the less impact the cost of a single ticket has on your life.
My son has a fair amount of premium bonds for a 6 yr old, every time we think of switching to an Isa he gets a premium bond win. In the last 12 months hes won around £300, which is a around a 10% return on his holdings, me on the other hand, i have very little at 46 and havent won in years. as long as h'es winning I dont mind, its his future house deposit etc.
1:04 I think you are being generous with the governments intentions there, the money they get from NS&I is used to feed the national debt, they must have known most people wouldn't purchase Gilts so gave them these instead, currently at below BOE base rates.
NS&I used to offer all sorts of index linked bonds but they can obviously borrow cheaper elsewhere these days.
An excellent piece Damien. Insightful and well explained. Against logic I'm keeping mine for the thrill born of uncertainty, and what if.
The best annual rate I have got on my premium bonds was just 3% over one year. I have been recording the returns over the last ten years.
Good place to park cash with instant access and no tax implications. Sometimes convenience is more important than scraping every last drop of interest.
Exactly why I hold £50k of them Damien. Glad you didn't condemn purely on the rates like some do!
Fascinating level of detail and so well presented. Excellent video. All the best Damien.
I had some money from my parents to use on a deposit for a house. It was about £5k and I left in premium bonds for a year whilst I found a house and got the rest of the deposit together. It was Covid so I didn’t want to get a draw down from market exposure. I didn’t get a single win. Not a single one in a year. I’ll not be touching it again.
is it as lucrative as the stock market? no
is it as risky as the stock market? no
is it as safe/liquid as if you deposit you money at a bank? yes
do you get more money (statistical) out of as on the bank with normal interest? yes
this alone would answer IMO the question ^^
and im a german and we have sadly no thing as this but yeah they are a good "investment"
Market highs can sometimes be followed by corrections, but predicting the timing and extent of it is challenging. I've heard some analysts talk about a 'massive' correction. It makes me wonder if it's time to adjust my $2M portfolios or maybe even consider some defensive investments.
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.
The only time they ever make sense is if you have maxed out the pension allowance and your ISA and you kids ISAs and have nowhere else to put money and even then....they don't really make any sense 😂
Agreed!!
The only reason I am maxing out my pension is that I am 61. Premium Bonds made far more sense when I was looking to buy a house fifteen years ago, although I am back at the maximum so get a random bonus appear in my current account most months.
@@MrDuncl mathematically you're losing money...
Totally agree and don't forget your kids SIPP. You put in £2880 and the government add another 20%. Invest it in a tracker fund and hopefully it will help them when you are gone and help them to start investing earlier than later as I suspect they may not get a state pension.
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
3.5% for me last year.
£50 this year in January and £200 in March.
I'm not complaining, this year off to a good start.
I put in £500 each for my two kids into premium bonds about 14 months ago they have won nothing yet. However I am just leaving that there for them until they are 18. Just a token amount giving them a chance to win lol. I have already written this money of if it grows that’s a bonus.
I have a little money in premium bonds, but I would recommend putting as much as you can afford into a pension and retiring as early as you can
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
Agreed good place for emergency funds and instead of doing the lottery. I just did the calculation for my winnings and I am getting £191 per month average so far.
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?
Nicely done Damien, informative with a hint of humour. Hadn't thought of using them as a tax efficient emergency fund expansion
Well it's the 25th and they haven't contacted me so I guess I haven't won the big money :(
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
There’s no one that can touch Damo on video quality right now.
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
Good content. Love the new format.
You have been watching a long while
So this means a lot!