Have you got 50k in premium bonds? If not then you could move some over there to limit your tax liabilities and invest extra each year in ISAs from that pot?
I have some PB's and they don't pay interest of course but there is a chance of a big win. I've had numerous smaller prizes. The climbing interest rates over the last few years means good news for savers and more interest can mean more tax. With the annual ISA allowance being £20k, moving money into them takes time but what the hell, there are many people just struggling to exist these days so in that light, paying tax on savings interest is a bit of a non issue.
I retired 6 years ago, I am 71 next Sunday, don't feel any different from being 31, interests are beer and motorbikes except now I don't have to rush off to work to pay for it, enjoy your retirement, I do.
I remember waking up about 5am the first day I did not go to work after I retired. Lying in my warm bed, the sound of the neighborhood coming alive with cars starting up as neighors started leaving for work just brought a big smile to my face. Just lyed there and enjoyed it so much. ...J.D.
Applied for mine when I retired, but have never used it, in fact I don't think that I have been on a bus for over thirty years. It is useful to prove that I am over 18 when I buy an age restricted product from Screwfix though.
I had hardly used the bus service in many years until I got my bus pass. If I'm not in a particular hurry to get somewhere, it's not convenient to use the bike and it's too much hassle to drive (traffic, parking etc) then I take the bus. Upstairs at the front! Lovely. I recently had a 5 day break in London. Being able to use the bus service for free was a huge bonus, seeing the sights (better than the Underground) and being able to step on and off at random (yes I got lost) contributed to a great holiday. I've since done similar trips to other cities and it's the best way to get around.
I'm a year away from being able to claim State pension. What Pegscraper mentioned about being able to claim some of your deceased spouses pension is interesting to me. I 'retired' 7 years ago to look after my wife and have lived on private pension income since then. Obviously I haven't been paying into NI so my own pension forecast shows a shortfall. My wife died just under 2 years ago and therefore I assume I can claim some of her lifetime NI contributions to bolster my pension?
I've still got a few years to go before I can hang up my calculator but to all of you, retired or looking forward to it, I really recommend you seek out and speak to an independant financial advisor. The rules about what you can do to maximise your retirement income effectively and plan ahead for tax and inheritance liabilities changes so frequently it will help to engage a pro. From using up allowances in the most effective way, to knowing how to keep your funds in a scheme that will be outside your estate for IHT purposes, to knowing what you can claim and helping you do it, they are so useful. Don't just speak to the advisor from your bank/building society or to someone from a restricted company (such as St James Place) as they can only suggest products from their own offerings which may not be best for you. Money Saving Expert can help you find a proper IFA if you don't get a recommendation from friends family. Good luck all.
The biggest mistake I saw when I was working was most people do not do their "homework" before they retire. They know little or nothing about what is availible to them. With some careful planning I ended up with two "Defined Benefit" pensions and my wife and I both draw our Social Security. I worked with men who did not have a clue what they were able to draw until they were ready to pull the plug. Poor planning makes for a poor retirement. Just had my 15th. Anniversary of my retirement at the end of the year. ...J.D.
Can @littleade or anyone else please expand a bit on how this purchasing premium bonds helps the tax situation? I was talking to an off road biker last weekend and he was saying he had £75k in PB as he'd spread it between him and his wife (£50k personal limit). Surely with no interest paid, then it's losing money in a big way to inflation in the blind hope of a win. The guy above had had a £5k win last year and a £350 a month or so ago but, even so that pretty poor growth on £75k.
PB's only help the tax situation in that any winnings are interest free so, in that respect, they limit your tax "liabilities". I'm also getting stung this year by the taxman with interest on savings in non ISA accounts so I'll be adding to my ISA's come April.
Premium Bonds are part of the National Savings Scheme and have a different impact on income- and inheritance taxes than, say, a building society savings account or an ISA. Knowing how to use them best for your personal situation is where an independant financial advisor can really help you. Just because someone you know has £x thousand in PBs does not mean it would be ideal for you.
I chose to do my own homework on pensions and savings prior to retiring. PB's are no good if you want a regular income or to build savings via interest. What you are doing, effectively, is sacrificing the interest you would get on savings for the chance of a big tax free win but the value of the bonds themselves, plus any winnings, still count as part of your estate when you die so will be subject to inheritance tax if you fall into that bracket. I also have a regular savings account with NS&i where the interest is taxable and an ISA which is not. When interest was down below 1% 3 or 4 years ago it was less of an issue. Now they're running around 5+% the individual tax free interest allowance is much more easily exceeded and will catch many more savers. Making stock market investments is a whole different ball game where expert knowledge and advice is essential IMO.
As others have said, you don't get any interest on your investment, but any winnings you get are tax free. You can chose whether to have any winnings to your bank account or if you have less than the 50k limit buy more PBs. We normally win something every month at the moment and there's always the chance we'll win a large amount so to us it's a bit of fun mixed in with some return on our capital investment at no risk to the investment itself. You pays your money......
Premium bonds are a bit of fun. Like Ade, we are having a win most months. As interest rates rise, the chances of winning raise. I’ve done ok with my bonds and I’m above what I’d get in a savings account.
I’ve never looked in to PB’s so forgive a stupid question @Oldskool but how does the chance of winning improve with the interest rate rising?
I've had premium bonds since I was kid. Its obvious really, but the more you have, the more your chances of wining. Someone with the maximum allowance of £50k will be unlucky not to win a small prize in almost every monthly draw, perhaps significantly more than that. It's also clear you can get a better return on your investment elsewhere if don't need instant access to the monies invested. What I like about PB's is you have got a chance of winning a big prize, the most I've ever won is £1000, but of course you could win a million. Also f you need your money back in a hurry normally it take just a few working days to get it back once you've made the application. They aren't for everyone, but they work for me.
