Premium Bonds – are they worth holding?

Premium Bonds – are they worth holding?  –  An awful lot of people own Premium Bonds, so many in fact that the total amount invested in Premium Bonds is now over 63 Billion.

There are two main attractions to Premium Bonds:-

First, there is no risk to your capital, when I say no risk, I mean monetary risk. Quite clearly if you have owned Premium Bonds for many years the “real” value is diminished by inflation.

The second reason is the thrill of winning a prize, particularly one of the £1M big prizes. If you sit down and work out the maths, your chances of winning one of the big prizes is infinitely low, so low that you should not hold out any hope at all.

Surely, though, if you hold a large number of premium bonds, then your chances increase? Hardly even if you own say £35,000 worth of premium bonds you are likely to win only £437.50 equating to an interest rate of 1.25% on average.

Sadly, Premium Bonds are a huge rip-off.

If you do hold a large number of premium bonds what can you do?

I do have some suggestions: –

  1. Cash them all in and take your family on a fabulous holiday.
  2. Cash them all in and invest half in good income producing unit trusts, and treat your family to a fabulous holiday with the rest.
  3. If you are more concerned about your level of income in retirement, then consider investing the monies into Real Estate Investments Trusts, there are very high yields available on these, even as high as 9 or 10%. Once you are in receipt of this income, you have my permission to spend a little of it on new premium bonds. Better to do so out of income then leave your capital to dissipate over the years.

What are your thoughts?

Ray Best is a resilient Financial Planner with a unique approach to investment planning, his work ethic has propelled him from humble beginnings to be voted as a top UK Financial Planner by Vouched For (as published in the Sunday Times). These days he works with families with large investment portfolios or big inheritance tax liabilities, the first step, is to book a Discovery Meeting HERE.

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