Can an Irish citizen buy UK Premium Bonds

[Roro999]

Can an Irish resident purchase UK premium bonds ?
If so how do the odds of winning compare to prize bonds ?

If so are any winnings taxable and if so at what rate ?

 

[ClubMan]

If so how do the odds of winning compare to prize bonds ?

Irish Prize Bonds pay out 0.35% of the total fund.
UK Premium Bonds pay out 3.3% of the total fund.
Both quote this in different places as an interest rate which is totally misleading to punters.
In either case the chances of winning anything at all are slim - 24,000 to 1 for a single UK Premium Bond.
I can't find the odds of a single Prize Bond winning any prize offhand - the seems to be c. €4.4Bn in Prize Bonds which is c. 704,000,000 bonds but it's actually difficult to find out how many prizes are on offer each month in order to work out the odds of a single bond winning any prize.

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[Steven Barrett]

I have lots of clients who have money in Prize bonds. One of the first things I tell them to do is to get rid of them. They are a guarantee to lose you money. Inflation is going to eat into the real value of your money as you get zero return from them. If you are going to keep your money in cash, at least put it in a state savings cert or bond where you get some interest that will go someway to maintaining the real value of your money.

 

[Roro999]

Thanks for replies. I see that The Naked Trader has bought £50k in Premium Bonds this year and has won £6k so far tax free including a 5k win. Even just the 1k on 50k isn't bad. So I was wondering about them from an Irish person's viewpoint in can they be purchased and are any returns taxable.

 

[Duke of Marmalade]

I can't find the odds of a single Prize Bond winning any prize offhand - the seems to be c. €4.4Bn in Prize Bonds which is c. 704,000,000 bonds but it's actually difficult

These are the current "odds" on Prize Bonds:

The big prizes are set in stone but reviewed from time to time. The balance of the 0.35% (currently €15.4m) is paid out in €50 prizes - currently over 200,000 of them per annum. The very vast majority of the prizes are thus in fact €50. A sizeable holding at today's rates would expect to get that 0.26% or thereabouts with the balance of .09% sort of Lotto tickets but actually worth about 0.2% in Lotto tickets as the latter only pay-out 50%.
Normally this is a very attractive alternative to deposits and is the deposit of choice for yours truly.
But Prize Bond holders have been treated shamefully in recent times (as have other State Savings products).
In the UK Premium Bond rates have increased from their low of 1% to 3.3% - they sort of track the Government Bond yield - it is a way of giving widows and orphans what the big girls get. In Ireland Prize Bond rates have not risen from their low of .35% despite Irish Government Bond yields having risen from near 0% to over 2.5%. Why is nobody screaming about this?

 

[Duke of Marmalade]

In either case the chances of winning anything at all are slim - 24,000 to 1 for a single UK Premium Bond.

That's 24,000 to 1 a win for a single bond of £1 in 1 month. That equates to 24 wins in a year for £48k.
The bad news is that they will almost certainly be the £25 and £50 prizes - still about 2% p.a. and fairly certain to be between 1% and 3%.

If so are any winnings taxable and if so at what rate ?

Good question! I think in theory "winnings" would be taxed as foreign income. All the same you could try @ClubMan's trick of quoting 24,000 - 1 and arguing that it is gambling - and gambling wins are tax free. Problem with that argument: you have no chance of losing.

 

[Allpartied]

I have lots of clients who have money in Prize bonds. One of the first things I tell them to do is to get rid of them. They are a guarantee to lose you money. Inflation is going to eat into the real value of your money as you get zero return from them. If you are going to keep your money in cash, at least put it in a state savings cert or bond where you get some interest that will go someway to maintaining the real value of your money.

Perhaps they like a flutter and it is the best flutter out there.
With interest rates at 0.5% you are not wagering much.
If you have 10k, and put it into a deposit acount, you get 50 Euros for the year. DIRT may be payable.
So, you are actually betting 50 Euros, for a year of draws, 52 goes at the lottery.
Compared to the actual lotto, its a much, much better deal.
And 10k gives you 400 tickets, for each draw.

 

[Marc]

You should never have cash assets in one currency (Sterling) and your liabilities in another (euro)

Otherwise you are taking a pedestrian savings account and throwing in a side bet on the currency markets. Which have a volatility of 8 to 10 and zero expected return.

One of my favourite stats is that Sterling has lost over 1% pa against the US$ since 1955. Let that sink in….

So if you are going to gamble with your cash deposits there are much better ways of doing it such as discounted Irish government bonds (although there are some questions over the tax exempt nature of these that I haven’t had time to flesh out property yet)

One of our preferred options is a U.K. trust with a yield over 6% backed by a mixed bag of global bonds.

You therefore have income tax treatment rather than dirt or some other concoction to worry about.

 

[Duke of Marmalade]

So if you are going to gamble with your cash deposits there are much better ways of doing it such as discounted Irish government bonds (although there are some questions over the tax exempt nature of these that I haven’t had time to flesh out property yet)

Definitely free of capital gains tax or stamp duty. Coupons are taxed as income.

 

[NoRegretsCoyote]

You should never have cash assets in one currency (Sterling) and your liabilities in another (euro)

“Never” is too extreme.

A euro resident holding five per cent of their wealth in sterling assets is not taking a massive risk.

(For the rest I agree. Chasing yield in another currency for its own sake is generally unwise. )

 

[Ravima]

Can an Irish resident purchase UK premium bonds ?
If so how do the odds of winning compare to prize bonds ?

If so are any winnings taxable and if so at what rate ?

Yes you can. There is the usual AML ID checks. The winnings are tax free as they are 'winnings' and not 'income'. They might require you to hold a UK bank account though.

 

[Marc]

“Never” is too extreme.

A euro resident holding five per cent of their wealth in sterling assets is not taking a massive risk.

(For the rest I agree. Chasing yield in another currency for its own sake is generally unwise. )

Are you Sure?

Sterling lost 7% on the morning of the Brexit result

 

[NoRegretsCoyote]

Sterling lost 7% on the morning of the Brexit result

It's simply a question of balance.

I am making UK NI contributions mainly because I'm entitled to and it's a great deal. I'm also glad to have maybe 15% of retirement income in non-euro assets. Some diversification is a good thing!

 

[Marc]

It's simply a question of balance.

I am making UK NI contributions mainly because I'm entitled to and it's a great deal. I'm also glad to have maybe 15% of retirement income in non-euro assets. Some diversification is a good thing!

Paying voluntary NI contributions to boost a UK State Pension entitlement isn't remotely the same as holding cash in UK deposit or National Savings accounts.

There is no issue in holding risk assets in foreign currencies as the volatility of the underlying asset swamps the currency (this is why euro hedged equity funds are questionable)

However, for cash and bonds it is empirically proven to be better to hedge or hold the asset in the base currency.

The only thing worse is borrowing in a foreign currency

 

[hazelgreen]

Was the original question dealt with ? can we buy UK premium bonds and what happens to winnings?

 

[Roro999]

Yes it has been for me. Thanks.