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premium bonds for my 21 year old nephew

People believe they will be luckier than average, they're not an especially good (or bad) investment. At the moment they're paying the equivalent of 4.4% variable but that will drop again. Prizes are tax free unlike interest payments but you'll find better savings rates out there...

Interest rates

Check the summary of our latest interest rates. Where relevant, it includes variable rates that have already been announced but not yet come into effect.
www.nsandi.com www.nsandi.com
 
Tony L said:
I’ve found it remarkably poor. I parked some cash there a few years ago and have won a few £50s. It has worked less well for me than conventional investments e.g. Fundsmith
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With an equities fund like Fundsmith you accept higher risk for a potentially higher return. In a market crash the value of equities may drop significantly whereas a bond will always retain it's face value. Though obviously inflation erodes the value of the bond in real terms over time. Whether the coupon (or winnings) makes up for that depends on the rate of inflation.

They're fundamentally different instruments and in theory non-correlated (though not always in practice). The classic investment approach is to have a mix of both so that bonds with lower returns, but also lower volatility, act as a buffer for stock market dips.

Apologies if I'm just stating the bleedin' obvious here : )
 
Darth Vader said:
If you have £50K and want it to grow then its better to invest it - I don't consider premium bonds an investment. If you aim for an average of 7% growth by reinvesting the dividends you may double that to £100K in 10 years. After 20 Years £200K and so on. You can see why its good to start young.
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Yes and the reason why it's so important to begin a pension or some form of retirement saving early in life - it can be an expensive business trying to make up for lost returns later in life.

Most definitely NOT investment advice but I noticed that gold has returned 760% over the past 20 years. So £50k would have turned into £380k. Very unlikely to repeat that kind of performance unless we see another crash like 2008 but hindsight eh?
 
gavreid said:
People believe they will be luckier than average, they're not an especially good (or bad) investment. At the moment they're paying the equivalent of 4.4% variable but that will drop again. Prizes are tax free unlike interest payments but you'll find better savings rates out there...

Interest rates

Check the summary of our latest interest rates. Where relevant, it includes variable rates that have already been announced but not yet come into effect.
www.nsandi.com www.nsandi.com
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I wouldn’t suggest they should be the sole form of saving but they have a place, plus the money is not locked up for several months or a year. Their rate of return will drop but so will interest on savings accounts. ISAs and using the £500/£1,000 tax free interest allowance needs to be factored into the thinking.
 
clivem2 said:
PBs are in effect instant access (it takes about 2 days to receive funds).
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Yes (but surprised it's so quick) but you have to wait a month at least to join the draw; it used to be 3 months which was silly and put people off, esp. in good interest periods.
 
paulfromcamden said:
According to the Martin Lewis site a median of 3.9%.
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Think the high, which was about 4.7%, dropped recently to 4.4%; that's what they pay out. I s'pose my average over the past year has be a smidgen over 3%, so Cav on 5% must be taking commission.. Still, 3% is really = to 3.6% is you add the tax. Whatever, it's the fun of safe gambling ! :)
 
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