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Legal & money

Savings Account or Premium Bonds?

(155 Posts)
Chestnut Sat 07-May-22 15:43:39

I have some money languishing in an ISA which only pays 0.05% interest, so I want to transfer it somewhere else. I can't decide whether to put it in a savings account offering 1.25% interest or dump it into Premium Bonds. Anyone here savvy with money?

Charleygirl5 Sat 07-May-22 16:19:48

One needs a considerable number of premium bonds- £40k + for you to win small amounts regularly.

I would find the highest interest-paying account but one which is flexible because interest rates will rise this year. When you think it is at its highest, find the best fixed rate and pop the money in there for a few years.

ShropshireMiss Sat 07-May-22 16:23:49

I’ve got both cash ISAs and premium bonds.
If you are going to keep the cash ISA then you should transfer it to another cash provider with a better rate. You can easily get 0.8% easy access and higher if it’s fixed term or restricted access. The advantages of keeping a cash ISA rather than just a normal savings account with perhaps a higher rate is that the government could always get rid of the £1000 tax free saving interest allowance in the future. Also it would give you the flexibility to transfer the cash ISA into an investment ISA if you wanted to go down that route.
I like premium bonds and win one or more lots of the £25 prize most months, and there is the thrill of the tiny chance of winning the million pound prize each month. To have a realistic chance of winning the £25 each or most months you do need quite a large amount of premium bonds. Personally I think the thrill of seeing whether you’ve won the big prize each month alone makes them worth it. Some people describe premium bonds as effectively gambling the inters you would have got if it was in a regular savings account or cash isa. Another way of looking at it is being like a lottery but you keep the initial stake.

grandMattie Sat 07-May-22 16:24:31

I have the maximum number of premium bonds. As interest rates are insultingly low, any prize even a £25 one, gives you a greater return…

Chestnut Sat 07-May-22 16:27:30

There was a thread about PBs a while back and people said they were winning regular amounts, but most of them didn't say how much they had invested. I was only going to put £19k so not as much as you said. People with £20k said they were winning £25 most months which would be good enough.

Chestnut Sat 07-May-22 16:30:12

The advantages of keeping a cash ISA rather than just a normal savings account with perhaps a higher rate is that the government could always get rid of the £1000 tax free saving interest allowance in the future.
That's true, but the Premium Bonds won't ever have a tax problem either.

ShropshireMiss Sat 07-May-22 16:31:08

The current chance of each one pound unit winning is last time I looked 34,000 to 1. So if you had £34000 of premium bonds statistically you would be likely to win one prize each month. The vast majority of the prizes are the £25 prize. so statistically with average luck you could expect to win £300 a year in prizes.

ShropshireMiss Sat 07-May-22 16:32:35

I agree with you Chestnut. I would say max out the premium bonds first. Then go for cash ISAs.

Luckygirl3 Sat 07-May-22 16:32:40

Me too - max holding of Premium Bonds and I earn more than in any ISA - and it is simple - I know where it is and I do not have to faff around getting new ones.

ShropshireMiss Sat 07-May-22 16:35:43

The smaller building societies often offer some of the better cash isa rates.

Chestnut Sat 07-May-22 16:39:08

I dislike that your savings account starts off with high interest rate which drops after a year, then you have to open a different account to get the good interest rate. I have just done that with a Nationwide savings account. I get rather stressed transferring money online and I don't like all the faffing around with large sums of money.

Ilovecheese Sat 07-May-22 16:45:46

I have a comparatively small amount of premium bonds but have calculated that they earned 0.5% interest this year. But I do have a lucky streak for things like that.

Chestnut Sat 07-May-22 16:56:27

Hey, Ernie doesn't account for people with lucky streaks! He's random 🤹‍♀️

Charleygirl5 Sat 07-May-22 17:03:31

I win something most months from my premium bonds. I am close to having the full amount because anything I win goes back into the pot. The most I have ever won is £500. It is usually a single or a few £25s. I also like the thrill of it- somebody has to win the million so why not me?

LadyGaGa Sat 07-May-22 17:08:26

I’ve had £30,000 in PB’s since January when I retired. I have made £125 pounds so far which I am more than happy with. It goes into my Christmas present pot. I like the fact that should I need to cash them in I can do so easily with no penalties. My husband puts his winnings back in the PB’s.

AGAA4 Sat 07-May-22 17:16:24

I did win £5000 once on the Premium Bonds. Happy Day.

FlexibleFriend Sat 07-May-22 17:21:50

I've only got £1,125 in premium bonds bought for the first time just over a year ago. That's £1000 of savings and £125 in prizes definitely better than any savings account I've come across.

crazyH Sat 07-May-22 17:23:03

That’s super AGAA4 - no one I know has won more than £75

AGAA4 Sat 07-May-22 17:36:37

crazyH

That’s super AGAA4 - no one I know has won more than £75

I was quite stunned. I don't usually win anything.

tanith Sat 07-May-22 17:37:27

I also win £25 most months sometimes x2 if you can afford to buy at least 30k I'd go with the bonds

joannapiano Sat 07-May-22 17:46:30

I have the maximum Premium Bonds and this month I won 3x £25. The most I have won is £500. Our ISA’s have awful rates of interest at the moment.

Chestnut Sat 07-May-22 17:53:10

Wow, I think I may go with the Premium Bonds! Otherwise it's 1.25% interest from the savings account. It's a chance but maybe I'll win something.

Shandy57 Sat 07-May-22 17:56:46

If you have an up to date phone, I recommend the phone only app for Chase Bank, FSC regulated, currently offering a savings account with 1.5%. I keep up to date with the latest easy access accounts on MSE.

midgey Sat 07-May-22 18:26:57

Check out Moneysaving Expert. Lots of good advice on there.

sandelf Sat 07-May-22 18:39:53

www.moneysavingexpert.com/savings/best-cash-isa/ Pick the ISA that offers 'transfers in' that has the best rate/term for you. Personally at the moment I would not go for fixed rate, as rates are likely to rise. I'd only put money into PB if there was no downside - and here you'd be losing the ISA sheltering.