Is it Worth Buying Premium Bonds

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Premium BondsPremium bonds have been around for several decades, and are one of the most well-known ways to invest in government-issued securities. Last year, the limit for investment in premium bonds was quadrupled from £10,000 to £40,000. But what exactly do premium bonds entail, and are they really a good place to put some of your savings?

About Premium Bonds

Premium bonds are a very safe place to put some savings. You can sell the bonds and reclaim your money at any time, and the risk to your funds while they are being held is low. However, unlike bank accounts or investments, there is no interest paid on your money. Instead, a random draw assigns monthly prizes to bond holders. Each individual bond is entered into the draw, so the more money you place into premium bonds the greater your chances of winning. Around 21 million individuals in the UK – which equates to roughly one in three of the population – currently hold 100 or more bonds. The top prize is a tempting £1 million, but of course the vast majority of prizes are much more modest.

Premium Bonds vs Savings Accounts

People purchase premium bonds in the hope of making money on their savings. It is therefore worth comparing the amount you can expect to receive with the most popular way to save; bank accounts.

The returns you can expect to receive from premium bonds average out at 1.35%. This is not a particularly attractive rate. It is no better than many easy access savings accounts, and these offer more flexibility and more instant access to your funds should you find that you need them. If you are willing to tie up your money for a certain term, you could receive significantly better returns from simply sticking with your bank.

Of course, the allure of premium bonds is that you might be lucky and win much more; perhaps even the million pound jackpot. However, this is pure gambling and the odds are not all that special. Equally, you might be unlucky and win nothing at all. It is, quite literally, just down to luck of the draw.

Are Premium Bonds Worthwhile?

This sounds like a very bleak picture of premium bonds, and indeed many people overestimate their value as a saving strategy. However, this does not mean they don’t have their uses.

Interest rates are so low that it can be tempting to invest some of your savings in premium bonds for the added excitement. Your invested capital is subject to extremely low risk, and you only stand to miss out on interest. When that interest doesn’t amount to much, it can be tempting to forego it on the offchance of a big win.

Premium bonds can also be useful for wealthier investors with a diverse portfolio who are not necessarily relying on every penny they can get from their investments. Premium bonds provide a very safe place to keep up to £40,000, and there is still that chance that they might win a prize.


Mis-Sold PPI Payments top £10billion

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The sheer scale of the payment protection insurance (PPI) claims scandal is illustrated by the recent report that the total payout to consumers has now surpassed the £10billion mark across all the associated lenders. The figure was reached in April, 2013, when – in that month alone – over £420million was paid out to consumers claiming back mis-sold PPI fees. The Financial Conduct Authority (FCA) issued the figures with a proviso stating that the final amount will be far in excess of the amount reached so far.

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24 Firms Involved

Although there are more than 20 firms involved in the PPI mis-selling scandal the majority of complaints refer to three of the biggest names in the consumer finance world: Lloyds Banking Group, RBS and Barclays are the major players in the saga, and have so far set aside billions of pounds in order to pay back the fees on mis-sold accounts. The move followed an instruction by the High Court that the lenders must pay back all such fees, and the resulting rush to claim has led to banks and lenders needing to take on outside help to process the claims.

Deadline Discussion

Earlier this year the FCA held talks with industry leaders about the possibility of imposing a deadline for mis sold PPI claims; while many were in favour, others were against the idea, as they believed it would simply lead to a further rush of claims that would place a heavy burden on the already over-stretched claims procedure. Some banks, including Lloyds, have already been fined for delaying PPI compensation claims, and the Financial Ombudsman is dealing with record numbers of complaints pertaining to PPI claims and other financial gripes.

Using a Claims Company

The widespread publicity regarding the scandal has led to many consumers choosing to use a PPI claims company such as the PPI Claims Advice Line to pursue their claim, and this can be an efficient method of getting compensation. With many more claims to come and no sign of things slowing down, the lenders are bracing themselves for many more months of dealing with PPI claims and trying to restore consumer faith in the financial industry.


Why and How You Should Start Saving

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You might have heard this many times.. but really why start saving? Just think of the needs you have, your need for basic commodities such as food, and personal emoluments, responsibilities like paying rent, electricity bills and water. You also want to have fun and travel. Not forgetting those unexpected issues that you need to take responsibility for financially.

Don’t keep your cash in the house and use it whenever you need arises or keep it all locked up in a safe. Although a safe is somehow secure, you never know you could be coerced into giving it up. So why really save?

Security!!

You need to to have the assurance that you still can pay for those unexpected expenses or unforeseen circumstances. In a recession many things can happen, in particular there is the risk of losing one’s job. There are tonnes of places you can save your money chief among them a bank.

In a bank, and not just any bank, choose a trusted bank. So go to a bank or building society and register for a savings account to keep your money safe. Money in your savings account in the bank earns interest so it proves to be an investment over time. In addition you will be able to keep track of how much money you have withdrawn, input or received in your savings account.

Loans

In this day and age loans are very unavoidable. The great thing with saving you can be able to enjoy loan options from your bank. Whenever you need a loan you can always approach your bank. However, loan payment differs with the type of bank. So it is advisable to partner with a bank that doesn’t charge a lot in interest.

How to effectively save

Budget on your needs according to the period of your income/salary gain rate. For example, if you earn your income monthly budget for that month’s spend and save the rest in your account.

Record your expenses. This is to look at your successes in your budget and work on the unaccomplished ones.

Clear your debts. Debts may hinder your saving ambitions if not cleared in time.

Extra cash should be sent to your savings kitty and this means that you should be very discipline to achieve this.

Have goals. If you have goals everything will be simple since you will know what you are saving for. This will make you economize your spending habits and save more!