Why Your Pension Is Failing You – SSAS/SIPP/Workplace Pensions

Unless you’ve taken a day to sit down and really review your pension situation, your pension is almost certainly failing you.

In the UK most of us just trust our financial futures to our employer, and just assume that our workplace pensions are being well managed – and that’s if we’re trying to be sensible.

The less sensible among us will be trusting their futures to the state pension – which is like putting your trust in a tiger not to eat you.

But this video is aimed at those who want their private pensions to shine, to outperform the mundane, and to set you apart in your retirement from the majority who are just barely able to get by.

We’ll show you how to get your pension working for you: how to withdraw money from it before you’re retired, how to break free of mediocre returns, how to add investment property into your pension, and how to dodge tax to the max while staying within the law. Let’s check it out!

Alternatively Watch The YouTube Video > > >

What Normal People Do

Most people in the UK of working age contribute to a Defined Contribution workplace pension. As well as this, they will hold several other workplace pensions from past jobs, probably one from each.

A UK worker will change employer every five years on average, which means your average 40-year-old will have 4 pensions on the go; 3 of which are no longer contributed to.

We were a bit more trigger-happy with the job-quittings when we were in the workforce, and between the two of us we’d racked up 11 workplace pensions by age 32 – none of which were doing a great job for us!

The problem with many workplace pensions in the UK is that they are UK biased. More than that, they are overly keen on low performing bonds.

One of MU co-founder Ben's old workplace pensions

Above is the breakdown of one of my old workplace pensions. Around 30% of it is bonds. For a 30-year-old, that is far too unambitious.

Bonds can be useful for people approaching pension drawdown age. But for someone with 3 decades to go until that happens, it’s frankly laughable.

Also, 38% is in UK equities – notorious for its low returns in recent decades. Why is this pension not investing larger amounts in the USA, the world’s economic powerhouse?

The answer? Workplace pension funds are stuck in the past, still conforming to home bias from the days before global investing became cheap and accessible.

Impact Of Home Bias And Too Many Bonds

The presence of too much UK equity and bonds is clear from the returns. This Aegon pension returned 5.5% annually over 5 years, which is 30% total growth:

Underwhelming performance of the old workplace pension

Over the same timeframe, a typical globally diversified equity fund – VWRL – returned 7.3% annually, which is 42% total growth. Lightyears ahead.

The problem with turning a blind eye to your pensions until you’re ready to retire is obvious – you’ve left it too late to make any necessary improvements.

The optimum time to get a grip on your pensions is the day you start your career – failing that, the next best time is today.

Finding out that your pension was invested in underperforming assets for the last 40 years at age 60 is not ideal. And yet this is what the majority will do.

Why Workplace Pensions Can Get Away With Poor Performance

They need to impress your employer – not you. And the wage-slave making the pensions decision for their company is unlikely to know much about investing.

A workplace pension provider could be chosen on the basis of sweet-talking the HR department better than the competition, rather than a proper long-term appraisal of their investment strategy.

What The Rich Do

Rich people don’t hold their futures in employee pension schemes. These schemes are too restrictive, with annoying rules that forbid you from accessing your own money until you’re at least 55.

Such rules don’t apply to the rich, nor to those aspiring to be rich who follow in their example.

They know better, and make use of a little-known type of pension called a Small Self-Administered Scheme pension, known as a SSAS.

SSAS Pensions – True Financial Freedom

A SSAS is a flexible pension usually for company directors of limited companies, managed by you (or by trustees that you appoint). Don’t let the ‘company directors’ part put you off – both Andy and I are company directors, as are many people who invest in property, as can be anyone who puts their mind to it.

We’ll come back to this point in a bit, but first let us tell you why you need to be aspiring towards having your future invested in this type of pension.

Once established, a SSAS pension can invest in all the normal assets such as stocks and shares, commodities, corporate bonds, and gilts – but it can also hold any investment property that you buy, and even shares in your own business.

It also gives you vast additional powers and opportunities, including getting your hands on your pension money whenever you need it, instead of in your late 50s like with other pensions.

Why You Should Have A SSAS Pension

#1 – Get Your Money When You Need It

You are allowed to make a loan of up to 50% of the value of your pension to your company for any use.

For example, you could use the funds in your pension to buy out part of your own company (i.e. giving you, the owner, a load of money). Alternatively, it could be structured as a loan to yourself.

Can you imagine dipping into your workplace pension at age 30? Well, you could, if your pension was a SSAS.

#2 – Invest In Property

As we touched on already, pensions don’t have to just invest in stocks and bonds – with a SSAS, you can use your pension cash to buy investment properties too.

One of our biggest annoyances with ISAs is that they can’t be used to buy properties (outright – we don’t mean REIT funds).

Well, a SSAS is an alternative tax-shielded product that you can do just that with, and still have some flexibility to access to your money at any age.

#3 – Very Tax Efficient

Contributions can be made by both you and your company – and because your company is probably you, this means tax loopholes!

SSAS pensions get the same basic tax benefits of other pension types, including:

  • Pension contributions are deductible against tax;
  • No income tax charge on investments;
  • No capital gains tax on investments;
  • A tax-free lump sum on retirement.

But SSAS pensions get extra tax benefits too:

  • Commercial property can be bought by the SSAS and leased back to your company, which may have tax advantages (also possible in some SIPPs);
  • Loans can be made to your business – the interest, which is effectively payable to yourself, could be tax deductible;
  • You have greater control over accessing lump sums, which might have tax advantages over normal pensions.

#4 – Fees Are Fixed

Fees are typically charged on a fixed basis rather than the traditional percentage charges for most normal pensions, and is shared amongst the members.

The ones we’ve seen cost between £300-£1,000 a year, no matter the size of your pot. This is great for wealthy people – probably not great for smaller pots.

How To Qualify

You usually need to become a company director, which can be of your own limited trading company.

Becoming a company director is not difficult – setting up a company online takes a few minutes and costs just £12 to do on the UK government website.

SIPPs – For Getting Your Finances In Order Now

Being a director with a SSAS pension is something cool to aim for maybe in the future when you have large funds to take full advantage.

But to help you get there, a SIPP is the perfect pension product for taking back control of your future, today, that anyone can open.

A SIPP acts like a workplace pension, but has the following advantages:

  • You can consolidate all previous workplace pensions into one SIPP which is under your control – what you invest in is completely your choice, not some pencil-pusher in HR;
  • The returns are therefore likely to be much better if you choose a more sensible mix of assets;
  • The fees are usually lower than what a workplace pension charges you.

The simplest SIPP we’ve come across is run by Nutmeg. It’s also one of the highest performing against their peers. You can see here how it smashes the competition:

Nutmeg SIPP performance

Over that same 5-year period as we discussed earlier, Nutmeg produced a 7.5% annualised return after fees, similar to the 7.3% we’d have expected from a global fund.

Nutmeg is a robo investing platform, offering ISAs and SIPPs. When you open one of these, you’ll be asked a series of questions, so that your portfolio is tailored to you.

Gone is the one-size-fits-all approach of the workplace pension, which tries to work for everyone, but ends up working for no-one.

You’ll also get 6 months without any fees if you find your way to Nutmeg via the link on the Money Unshackled Offers page. Check out the Nutmeg offer there if you want to open your own SIPP and get to grips with your pensions.

When A Workplace Pension SHOULD Be Used

There’s no doubt in our mind that a SIPP is preferable to an old workplace pension. But what about your current, active, workplace pension?

Your employer is probably matching your contributions to your current pension, in which case, that is a 100% return in year 1 and is free money which in most cases shouldn’t be turned down – regardless of how crappy the underlying investments may be.

For instance, I opened a SIPP for transferring my old workplace pensions into, which I’d accumulated from many previous jobs.

But I would always contribute into one current workplace pension, for the tax-free top-ups my employer would pay in alongside my own contributions.


Finally, you should ask yourself, do I even need a pension?

If you are able to set aside less than £20,000 a year, have no employer contributions, and are a basic rate taxpayer, then a Stocks and Shares ISA might be preferable to a pension.

You get similar tax benefits – the tax break comes when you draw from it, rather than during accumulation as with a pension, but it works out roughly the same in the end.

And you can retire whenever you feel ready – instead of a predetermined minimum age of 58.

As for us, we currently use SIPPs for our pensions, but as company directors we will be looking into transferring those into a SSAS as our wealth gets bigger.

But at least with our SIPPs, our investment returns are strong, our fees low, and our futures are in our hands.

What will you be doing with your pensions? Join the conversation in the comments below!


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These Small Cap Stocks Are Up 33% In 6 Months!

Small cap stocks are taking off!

The MSCI World Small Cap Index has absolutely skyrocketed over the last 6 months, up by 33%!

To put that into context, the last 6 months have been incredible for the S&P500, but even that only went up by 17%.

So small caps have given investors double the return that they could have gotten by investing in the biggest American companies.

This MSCI World Small Cap index is a core component of the Money Unshackled Ultimate Portfolio, which is what our own portfolios are now built around since we streamlined them a few months back.

So we’ve been pleasantly surprised to watch this chunk of our wealth jumping up, and up, and up every week since!

But this has got us to thinking: if the index of over 3,300 small cap stocks can climb by 33% on average in 6 months, what enormous heights must some of the underlying holdings have achieved?

Is it too late to jump on the momentum of some of the individual stocks, including many that rose by 100% and more?

We’re not so sure. 2021 looks ideally suited for continued small cap growth.

Today, we’re looking at why small caps are currently kicking ass, why we think they will continue to do so for a while longer, where to find small cap stocks, and we’ll look at some high performing individual stocks too.

Alternatively Watch The YouTube Video > > >

Why Small Cap Stocks Are Smashing It

Small Cap stocks have a number of different definitions, but for the context of this article, Small Caps are stocks with a market value in the bottom 15% of companies in the developed world, except for the bottom 1% (which MSCI label Micro Caps).

Because small caps are… well… small, they have very different qualities to larger companies that can be an advantage at certain points in the economic cycle.

Small Caps are:

  • More nimble
  • More adaptable
  • Less regulated
  • Breeding grounds for new ideas
  • High growth potential

These traits make them ideally suited to outperform in an economic recovery, which the stock market is anticipating, and which should remain throughout the next couple of years at least.

The ones that survive the crisis adapt to their new surroundings. Many other small operations take advantage of the open space left by lumbering larger companies that can’t keep up.

What’s Going On In That Small Caps Index

The Small Caps in the developed world are overwhelmingly US companies. 59% of them in fact.

This isn’t surprising, because the US is an ideal location to start a business, with its capitalist economy, rule of law and technological and scientific excellence.

MSCI World Small Caps Index Geographies

Below is the top 10 – apart from the top holding which is just some money market asset, these are all US companies.

Digging down into the month returns on some of these: Plug Power’s up 483%! Penn, a casino company, is up 163%. Novavax, a vaccine developer is up 70%. And on it goes with solid return after solid return.

Returns On Top 10 Holdings

Finding Small Cap Stocks To Invest In

In fact, if you wanted to stock pick some small caps, looking at the top companies of this index wouldn’t be a bad place to start your research.

All these stocks are available on commission-free trading platform Stake, who are in the process of bumping up their universe to 7000 US stocks, so you’re bound to find Small Caps on there that you can’t find on any other free trading apps. Even better, they are giving away a free US stock worth up to $100 to everyone who signs up via the link on the Money Unshackled Offers page!

Small Caps In 2021

Even though Small Cap stocks outperformed Large and Mid Caps in 2020, they are predicted by the experts to continue this outperformance in 2021.

A typical comment from the institutional investing sector comes from CEO of Grit Capital, a former $100m portfolio manager: “They have strong prospects going forward… there is more room to run.”

Morgan Stanley Wealth Management’s chief strategist says that “Small Cap stocks outperformed on average in the months following the troughs of Large Cap stocks during past recessions”.

“In the six, 12 and 24 months following Large Cap troughs, Large Caps gained 31.5%, 29.4% and 48.2% on average. However, the gains were larger with Small Caps that generated 46.9%, 53.4% and 86.2%.”

A strong economic recovery would benefit Small Cap stocks since they are more sensitive to what’s going on in the economy.

2021 is supposed to be the year of the vaccine.

This means 2021 has the potential for a strong economic recovery from those vaccines, but also from governments chucking more funds from the magic money tree into the economy.

Quick, nimble, adaptable Small Cap stocks with fresh ideas should outperform Large Caps in that environment.

Any fiscal stimulus such as tax breaks should propel small companies along further than large companies, who are typically well funded and more secure anyway, and so don’t really need much help.

Rising inflation is also somewhat linked historically to stronger Small Cap performance, according to Morgan Stanley.

Inflation flatlined in 2020, but the economy opening up again should reverse this, to the likely benefit of smaller companies.

CPI Inflation in the UK

A Quick Look At Some Small Caps

The MSCI World Small Cap Index got awesome returns, but you could have done much better by handpicking some of the many winners.

Let’s look again at the Top 10 stocks in the index. We ran these through Stockopedia to check out the fundamentals and see how we might do by investing in these stocks.

Top 10 Holdings with Stockopedia rankings

What should really stand out to stock pickers is that, while their overall stock ranks are a mixed bag, the Momentum of each stock is incredible.

These are stocks that are on the rise with no obvious sign of slowing down.

That’s just as well, because few of these stocks offer good Value, meaning their incredible recent share price growth and high valuation isn’t reflected in their current operating profit.

But maybe this doesn’t bother you if you think their future potential beats current profitability.

Maybe Charles River Labs with a 90 Quality score has a high enough Momentum that it’s mid-range Value score is acceptable, and can still make you a decent return?

Let’s have a look at some of these stocks, starting with Charles River Labs.

Charles River Laboratories (CRL)

These guys are an American biotech company – that’s right, the sector that’s leading the vaccine charge against coronavirus, and will be instrumental in protecting us from future health risks.

We’ve already mentioned their sweet overall fundamentals, but what else can we tell you about this company?

It’s Value metrics aren’t great, with a high forward PE Ratio (31) and forward EV to EBITDA (24) but a high PE ratio isn’t necessarily a bad thing as this suggests other investors are bullish about its prospects.

On Stockopedia, it qualifies for some screens (always a good sign on Stockopedia), has great health scores (all in the green), and an almost unrivalled track record of earnings per share growth.

It’s rare to see a stock with such consistency in earnings growth. It’s in double-digits pretty much every year, including the 2021 forecast.

Over on the cash flow side, it’s taken on a load of debt recently, but this was to acquire other businesses.

Charles River does this a lot, and it’s clear from the earnings growth that the company is skilled at making good acquisitions.

We’re just going to draw your attention to one more stock – we want to know more about Nuance, because they’re a high-quality, high-momentum company that designs artificial intelligence.

Nuance Communications Inc (NUAN)

6 brokers including Morgan Stanley and Barclays have this as a Strong Buy. So, the market loves this stock. But what do we think?

Well, it’s fundamentals are pretty average, but the reason we think there is such excitement around this Small Cap stock is its incredible forecasted Earnings Per Share growth of 120%.

What’s more, it’s a profitable company in a very cool field; AI. They are a tech company delivering solutions that understand, analyse, and respond to people.

Where it’s adding the most value right now is developing customer service tools like chat bots and call centre software, that should one day replace the need for human customer service staff.

The savings to businesses would be huge. Technology that saves businesses money is technology that makes its shareholders rich!

Sticking With Small Caps

Small Caps are an essential, but often neglected part of any portfolio, in our opinion.

Obviously short-term traders can have some fun with high-momentum small caps like the ones we just showcased, but longer term investors should be giving Small Caps some respect too.

We showed you in this article how Small Caps tend to have higher returns over the long term and so can help beef-up your pension pot but are more volatile in the short term.

And we showed you in this article how long-term historic comparisons between Large Caps and Small Caps have Small Caps coming out on top in the age of the internet.

We’re sticking with small caps – they make up around 21% of our core equity allocation, despite being just 14% of the developed world’s market cap.

Will you be joining us in investing in small caps in 2021? Join the conversation in the comments below!


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How Much Money We Make On YouTube With 30k Subs

How much money do small youtubers really make? We’ve all heard the stories of how some kid makes millions every month reviewing toys and how gamers are making serious moolah just playing games. Is this the success that everyone can expect or are these the exceptions that break the rule?

It goes without saying that most creators will never get the sheer volume of views that these superstar YouTubers get. But does that mean you can’t make a good living from YouTube? Here at Money Unshackled we’ve laid the foundation for a very successful business that primarily built up an audience through YouTube.

In this post we thought it would be interesting to open up our business model with you guys, so you can see exactly how much a small YouTube channel makes every month with close to 30,000 subscribers.

A lot of people think that YouTubers get paid based on their subscriber count or number of video views, but this isn’t correct! We’re going to show you what this YouTube channel has made and what really drives that income! Let’s check it out…

Alternatively Watch The YouTube Video > > >

New visitor? Don’t forget to check out the Offers page for freebies and discounts, including free stocks worth up to £200, no fees for 6 months on a Nutmeg investment ISA or pension, and even cash back on your utilities!

A lot of YouTubers have done videos on the “how much we make” topic but many of the ones we’ve seen clearly don’t fully understand all the different metrics that YouTube provide to creators. To be fair there is a lot of ambiguous acronyms out there such as CPM, Playback-Based CPM, and RPM. If you ever google these trying to find an average, you will get a thousand different answers.

Also, in some videos we’ve seen some YouTubers have even tried to predict other YouTubers’ incomes using a website called Social Blade. Social Blade is a great website if you want to look at a specific channel’s views or subscriber numbers, but the estimated earnings are way out.

Taking our channel as an example, Social Blade is predicting that we make between £345-£5.5k a year in advertising income. They’re basing this on a default CPM of a measly $0.25-$4.00 USD. Thankfully, our actual CPM is much higher than this, which you’ll soon see.

What The Heck Is A CPM?

CPM stands for Cost-per-mille, which means cost per one thousand ad impressions. Mille is Latin for one thousand – not a million as you might expect.

An ad impression is whenever an ad is served to a viewer irrespective of whether they skip it or not. There could be multiple ads on a video or there could be none at all.

In other words, CPM is the amount of money that advertisers will pay for one thousand impressions.

From what we’ve been able to work out, our CPM is on the high end when compared with other channels with an average of £12.35 per one thousand ad impressions. But as you can see it does tend to fluctuate within a range.

More recently though YouTube have moved away from CPM and are instead using Playback-based CPM as the preferred metric.

Playback-based CPM is very similar but rather than counting multiple ad impressions on the same video it just counts them all as one. This chart looks identical to the CPM chart just seen but it does differ slightly, giving us an average Playback-based CPM of £14.94.

So, what does this mean in terms of a YouTuber’s income? Firstly, it is the gross revenue figure, which sadly is not what we get paid from YouTube. They take a slice of 45% – leaving the creator with just 55%.

What Is RPM?

A more meaningful metric for working out what a Youtuber got paid from ad revenue is RPM, which means revenue per mille.

This time instead of being based on some confusing count of impressions, it is based on simple video views, whether they are monetised or not. Also, the revenue is the actual revenue that the YouTuber receives after YouTube have taken their cut. Our average RPM is £8.30, which is pretty good.

On all these graphs you may have noticed a few things:

  1. They don’t start until April 2019; and
  2. Income per view seems to vary hugely from month-to-month.

Although we started making videos in February 2018, we didn’t qualify for the YouTube partnership program until over a year later. You need 4,000 hours of watch time in a rolling 12-month period and 1,000 subscribers before ads can be switched on.

The reason that both CPM metrics and our RPM fluctuate so much is because there are a million different factors that drive how much advertisers are willing to pay. Seasonality plays a factor, location of your audience is huge, and so is the topic of your videos.

We saw a massive surge around March to April 2020 because investing suddenly became the hot topic due to the market crashing, and we presume advertisers were willing to pay more.

CPM and Views on a popular video of ours

Also, we had one video in particular that had a very good CPM whose views suddenly skyrocketed as you can see here by the green line.

Does Your Audience’s Geography Matter?

Yes, the location of a YouTuber’s audience is a huge factor in determining how much they get paid.

Advertisers from wealthier countries such as Australia, Europe and the US are willing to pay more for that same advertising space. We actively target UK investing, which is handy because we get a good CPM for our UK based audience, averaging £12.48.

That definitely does not mean all UK channels will receive that high CPM, but you are far more likely to earn a good CPM from the UK than you would from India for instance. Our CPM from India is just £1.62 – 8 times lower than what we get from the UK.

How Do Views Compare To Ad Revenue?

On our channel we can clearly see that more views tend to lead to more advertising revenue. Our channel has steadily grown to 180,000 views a month and ad revenue has more or less followed suit. However, there has been a drop in the last couple of months, which was due to a lower CPM – perhaps due to seasonality after Christmas.

For the first several months we barely got any views. In fact, that little bit at the start was almost all due to paid-for promotions. We were god damn awful – no wonder advertising our videos didn’t help us grow.

How Does Total Subscribers Compare To Monthly Views?

So, we’ve seen that views are highly correlated with ad revenue on our channel but what about subscribers?

We have had amazing success in keeping our audience watching, so a special thank you to you guys who keep coming back. From what we’ve seen online, lots of small YouTube channels don’t have this consistency. For us there is clearly an overwhelming correlation between Total Subscribers and Monthly Views.

Although we’re just short of 30,000 subs, we can safely say that we can expect to get around 200,000 views per month from a subscriber base of that size.

The subscriber count is often referred to as a vanity metric, but we can say with certainty that more subscribers do lead to more views, which in turn leads to more ads, which brings home the bacon.

How Much Revenue Have We Made?

In 2020 this channel brought in £14,000 in ad revenue alone, which isn’t bad considering for half of the year we were working on it just in the evenings and weekends. Of course, this isn’t the full story, and if it was it certainly wouldn’t be worth starting a YouTube channel from a financial perspective.

When we started YouTube, we set out to create a proper business in its own right. We were never going to be satisfied with £14,000 in an entire year. Based on the hours put in that would be less than the hourly minimum wage!

Most successful YouTubers, especially the smaller channels like ours, set up multiple income streams. A popular income stream for many is by asking for donations such as via Patreon. We never did this!

The bulk of the Money Unshackled income comes from affiliate marketing and sponsorship deals, and these combined typically make up around 70-90% of this YouTube channel’s income, making ad revenue a sweetener and not the reason to start a channel. Total revenue in January alone was over £8,000.

In fact, this is the same business model Money Saving Expert use. That site started with an email newsletter and funded itself with affiliate links. Likewise, we have built a community of people on YouTube who are interested in investing. We have also laid the foundations for a successful website and more recently an email newsletter.

A lot of YouTube channels – or businesses as they should be called – fail because they are too generic. We talk exclusively about money and investing, which means investment platforms and the like want to work with us and give our viewers special offers. If you talk about anything and everything, what advertisers will pay top dollar to reach your audience? – probably not many.

Another great income stream for many YouTubers is through selling merch – Hoodies, T-shirts, mugs and so on. We assume cool, trendy YouTubers will have the most success here. Other than creating this epic Money Unshackled branded Wage Slave mug we’ve not yet gone down this avenue.

When Can You Start Making Money?

We just released a video and post about 3 side hustles that you can start today – Two of which the money will start flowing in immediately, but the 3rd, affiliate marketing, which can be done via YouTube, is a very slow burner. It starts at zero and can potentially grow to make you a millionaire.

As we already said, you can’t enable ads until you meet the eligibility requirements, which will take some time to achieve – for us it was just over a year. Also, if you’re so small that adverts can’t be activated, few companies offering affiliate schemes will want to work with you either, nor will anybody throw money at your Patreon account.

From personal experience we found that nobody wanted to work with us until around 1,000 subscribers. The more subs we had the more credibility this gave us, and more companies were willing to work with us.

Looking back, it took us an entire year to make our first £50. With hindsight this was clearly worth it but so many wanna-be YouTubers never make it this far. That’s a lot of time and effort to yield nothing in return. If we didn’t have other income streams, it would have been very difficult indeed.

What do you think of YouTube as a way to make money? Has this behind-the-scenes post inspired you or put you off? Join the conversation in the comments below.


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Check out the MoneyUnshackled YouTube channel, with new videos released every Monday, Thursday and Saturday:

The 3 Big-Money Side Hustles To Start In 2021 | £££

How can you make decent money outside of your job?

The long-term solution that we tout on this channel is investing. But investing a few grand is unlikely to bring much of a change to your income today. 

No. What you need is a side hustle – something you can do that brings you in a second income, alongside your job.

Some side hustles can add hundreds, even thousands of pounds to your monthly income, which we can confirm from experience.

This can be achieved all while working around your schedule, and without a boss breathing down your neck. 

Here we’re looking at what we think are the 3 best ways to make serious money outside of your job, that anyone can do!

Alternatively Watch The YouTube Video > > >

Side Hustle #1 – Matched Betting

Big Payouts Up Front

Perhaps the easiest way to make money from home right now is with Matched Betting – which despite the name, is not gambling.

When I (MU co-founder Ben) did it, I made the equivalent of around £500 a month using the OddsMonkey package, for just half an hour a day, but I wasn’t really even trying.

There are countless examples in the Matched Betting community of people making way more than this.

Your profits will depend on how much time you are willing to dedicate to it. A novice can start doing this side hustle and be making many hundreds a month for less than an hour a day. 

But… What Is Matched Betting?

Basically, it involves placing 2 bets – 1 on both possible outcomes of a sporting event – which, when done properly, means one of your 2 bets is going to win!

In doing this, you temporarily lose a small amount of money, being the bookies’ profit margins. But this is not a problem because the beauty is, you are then awarded a free bet – which might be £10, £20, even £100! And you make your money by turning these free bets into withdrawable cash.

With this, you repeat the same process as before, but this time using the free bet!

Whatever the outcome, you are in profit!

That is as complicated as it needs to be – logging into your betting accounts once a day, placing 2 bets, once of which is sure to win, and then going about your daily routine.

You can choose to do several pairs of bets each day, if you want to make more money.

Hustling On The Job

It might be a bit cheeky, but a friend of ours who recently got into Matched Betting has been doing it casually during office hours – now that working from home is a thing – after 3 months he’s made close to £1,500 from it. 

He’s effectively getting paid twice for his time! And again, he’s not exactly busting a gut – he could be putting in more hours for more money if he felt like it.

On our recommendation he’s done it using OddsMonkey too.

Simple Example

The simplest offer will give you something like £20 in free bets when you sign up and place a small qualifying bet of, say, £5.

Following the simple guides on OddsMonkey, you’d get most of that initial £5 back too. And then the £20 is yours!

Beginner Guides on OddsMonkey

Usually, you’ll have to make a bet with it before you can withdraw it, but OddsMonkey hold your hand through the entire process with step-by-step guides – if you follow the steps, it’s a guaranteed win!

If you’re interested in giving this side hustle a go, check out the unique offers we’ve got for you in affiliation with OddsMonkey here, which currently include 60% off the first month, or 12 days of access for just £1.

At the link, you’ll also find great resources including a detailed video guide and “How-To” article explaining the Matched Betting process in full.

Side Hustle #2 – Crypto Mining 

What Is It

You can again make hundreds of pounds a month from this, but it requires an upfront investment in hardware, and the upfront investment scales with how much income you want to make. We’ll get to exactly how much you can make soon.

This side hustle is about creating bitcoins and other cryptocurrencies out of thin air, which can then be sold for cash.

When bitcoin was first invented, the creator decided to control the supply of the currency through a process called mining, meant to mirror the real-world slowly increasing supply of gold. 

Mining means that bitcoins were gradually created from nothing on normal computers around the world, by normal geeks running programs on their home PCs that solved equations. It’s worth pointing out that these mining programs run automatically – the person doesn’t actually do anything.

Whenever their program hit on the right answer, the nerd would receive a bitcoin. 

Bitcoin’s pioneers probably never realised that it would one day become a money-spinning side hustle for over 1 million people!

How Does Mining Work

You need 3 things:

  1. An account on NiceHash.com, which is where the mining is done;
  2. An account on a crypto trading platform – we use Coinbase;
  3. Graphics card(s)

Mining crypto needs a tonne of hardware, namely graphics cards (known for their high processing power) which you attach to your PC.

Example Mining Rig (Credit: Strukt/Shutterstock.com)

A rig like this using more modern graphics cards is capable of at least £250 passive income a month at current crypto values.

It works like this – you open an account on NiceHash.com, hook up one or more graphics cards, and the website starts running equations through them, which will create cryptocurrency over time.

The simplest way to make money is to mine in Sell mode, which means any crypto you mine becomes the property of someone else on the internet, but you receive a flat daily fee in Bitcoins in return.

Doing this, you would typically mine Etherium, Conflux,   or some other minor cryptocurrency, but be paid daily in Bitcoin. 

Although it is possible to mine Bitcoin directly, it takes too much time and is expensive.

You transfer your earned Bitcoins out to your wallet on Coinbase. NiceHash have their own wallets, but they got hacked a while back, so we’d stay clear!

Coinbase is far safer, the market leader, and rated top crypto platform by Investopedia.

The Upfront Cost

This side hustle requires a small upfront investment in graphics cards. The type our mining nerd friend uses is an NVIDIA RTX 2070. These cost around £500 (but graphics card prices change all the time due to availability) and are at the top end of the value range. 

You might want to buy several of these because the income you can make scales with the number of graphics cards you have, for the same limited amount of effort on your part.

Buy right, and you can even expect to get most of your upfront investment back. We’ve been told that NVIDIA graphics cards hold their value better than AMD alternatives. 

How Much Money Do You Make?

As you are mining various cryptos and being paid in Bitcoin, how much you make depends in part on when you sell the bitcoin (as it’s always fluctuating in value), and on the value of the cryptos you’re mining.

When prices are high, you make more money!

At time of writing, 1 card could make you £60 a month. You could buy 5 cards for £2.5k and make around £300 a month in perpetuity.

This calculator tells you the profit you’d make for each make of graphics card, after factoring in the electricity costs of keeping your computer on all the time.

Once it’s set up, this side hustle is almost 100% passive. Just check every-so-often that your internet is still connected!

Side Hustle #3 – Affiliate Marketing

It’s All About Scale

The ultimate goal of affiliate marketing is scalable income, or at the very least, breaking the link between your time and your income.

The idea is that you promote other company’s products and receive a share of the revenue.

The way to do affiliate marketing properly is by using the internet to build your reach. Your time is better served speaking to a million people than to ten.

Build Something

You might start a website or blog about a subject you feel passionate about, and then share products and services you believe in with your followers.

The most successful affiliate marketers achieved success not by pursuing money, but by wanting to share something with the world.

You should first set out to build some useful content that people will find value in – and only then you can monetize it.

You Have To Build Something (Credit: Aa Amie/Shutterstock.com)

Long Term Pay-Off

Affiliate marketing is rarely quick to get off the ground. First, you need to build a marketing platform, where you can host your affiliate links.

Look at MoneySavingExpert. Martin Lewis has built the mother of all marketing platforms, aimed at savers. We’re talking about the entire MoneySavingExpert.com website, email newsletter, and social channels.

Littered through that site are affiliate marketing links , that are constantly bringing in money. But that’s nothing to do with the reason people visit the site in the first place.

They visit because they know there will be useful information there about savings accounts and credit cards, etc.

Building a site like this that people wish to visit can’t be done overnight.

While a side hustle like Matched Betting results in immediate payoffs, affiliate marketing takes a while to get off the ground.

But it is in theory limitless in its profitability. It’s all about how big your audience is.

The Golden Rule For A Good Affiliate Marketing Side Hustle

Only promote products you truly believe in. Companies throw themselves at us to be affiliate partners,   but we have to ignore most of them.

To make a long-term success of an affiliate marketing side hustle, you need to put reputation before short term greed.

We only bring you offers for products and services that we think our audience want to use  and that we think can make you money, which we believe it is our job to do.

Why You Need A Side Hustle

If you want the confidence to escape a job you hate, the extra income from a side hustle can give you that confidence.

Or if you just want to make extra money without having to change careers or get promoted a bunch of times, having multiple incomes that work around your schedule can be life changing.

For us, every spare bit of cash we get our hands on we put into the stock market. Remember that with Matched Betting you can bag £500+ a month straight away, with no upfront costs.

Imagine investing an extra £500 a month over 20 years – factoring in compounding from dividends and capital growth at 8%, that could add around £300,000  to your net worth!

What side hustle are you currently involved in, or thinking of starting this year? Join the conversation in the comments below!


Featured image credit: Morrowind/Shutterstock.com

Check out the MoneyUnshackled YouTube channel, with new videos released every Monday, Thursday and Saturday:

Super Stock Portfolio – Automated Stock Picking With Stockopedia (& Trading 212 Pie)

Most investors know that if they build a portfolio of index tracking funds and invest for the long-term, they will retire rich.

Using historical returns as a gauge we can expect to make around 8% per year from such a strategy. Not bad!

But despite this, millions of investors, including us to a certain extent, cannot help but try and beat the market, which usually leads to higher risk and inferior returns.

Picking individual stocks is notoriously difficult and is often time consuming if done properly.

Is there a way of making market beating returns without the effort of scrolling through endless accounts and continually monitoring the news and stock performance?

Here we’re going to build an experimental investment portfolio of 20 stocks by taking a few shortcuts.

The goal is to automate stock picking as much as possible, build a complete portfolio in less than 10 minutes, and remove emotion from our decision making. Let’s check it out…

This portfolio will be built in a Trading 212 Pie using analysis tools found on Stockopedia, specifically looking at Super Stocks.

Stockopedia is a premium analysis, data, and stock screening tool that allows subscribers to narrow down an investing universe of tens of thousands of stocks to a handful that are worth checking out.

Stockopedia doesn’t come cheap though and if you become a subscriber you’ll understand why – it’s awesome!

If you head over to the Offers page, you’ll find a free 2-week trial to Stockopedia so you can have a play, and 25% off the first year should you choose to stick with it. You must use this link to get the offer.

What Stocks To Buy

Below are the 20 stocks that we’re buying for this experimental portfolio. All of these have been identified as the best Super Stocks that satisfy our rules-based selection method.

Most of you will probably have never heard of these stocks. But don’t let that put you off. We haven’t set out to build a portfolio of famous brands. We’ve set out to build a market beating portfolio with almost zero effort.

In a bit we’ll look at some of the stocks to get a quick overview of what we’re actually buying.

The Top 20 Stocks On Stockopedia (Per Our Rules)

A StockRank and whether it’s a Super Stock or not can and does change on a daily basis, so we will be regularly updating this portfolio throughout the experiment – we will be looking to refresh the portfolio every few months or so.

We’ve also shared the Pie within Trading 212, so you can check that out on the app, linked here.

As we’ll be updating the pie on occasion you may want to save it or even copy it if you want to join in with the fun.

While we were at it, we went ahead and created a Pie for the Money Unshackled Ultimate ETF portfolio, linked here, which we talked about in this article. These ETFs make up the core of both of our actual ETF portfolios.

The Newly Added MU Pies On Trading 212

What Is A Super Stock?

Every company on Stockopedia, which is now over 63,000 stocks, is analysed for its Quality, Value, Growth and Momentum across hundreds of fundamental and technical metrics.

They all come together in a set of scores, which Stockopedia call StockRanks.

Subscribers to Stockopedia will see these in the top right of every stock page and they are a fantastic way for investors to get an immediate view of a stock.

Straight away we can see here for Facebook that its Quality and Momentum scores are phenomenal, but investors will have to pay for it as its Value score is in the bottom half of stocks:

Facebook Stock On Stockopedia

The higher these StockRanks are the higher the probability of success is. Although Facebook looks good, it is not a Super Stock, so doesn’t make the cut in this portfolio.

A Super Stock is where a stock is ranked highly across all 3 Ranks.

Portfolio Rules

We have decided to keep rules to an absolute minimum because we want to test the true effectiveness of Super Stocks, rather than apply lots of subjective conditions.

We’re going with UK and US stocks only because we need to actually be able to buy them, and stocks listed in the UK and US will be the most widely available to us. There’s no point building a hypothetical portfolio that nobody can actually buy.

The next rule we’re applying is a minimum market cap of £50m. We’re going with this number because the bigger the company the more likely it is that the stock will be available on free trading apps like Trading 212, Freetrade and Stake.

In fact, even with a £50m market cap many of the stocks were not available in the Trading 212 pie, meaning we had to omit that stock and move on to the next Super Stock in the list.

We have decided to limit any one sector to a maximum of 3 stocks. We’re limited it to 3 because we want to ensure the portfolio is well diversified.

Without doing this there is a good chance that the stocks would all congregate around a few sectors and failing to diversify is a rookie mistake.

The last and final rule is that the stock must be available in the Trading 212 Pie so we could share it with you guys, but as we discovered this severely limited us in what stocks we could buy.

We applied all these rules and sorted the list from highest Stock Rank to lowest, and then a secondary sort on market cap. We’ll be buying 20 stocks and investing 5% in each one.

Must Use A Commission-Free App

We’re going to chop and change the portfolio frequently, so it will soon get very expensive if you’re paying for each and every trade.

It’s a catch-22 situation. Only the traditional platforms have all the stocks, but their high trading fees means we have no choice but to make do with the commission-free apps instead.

We actually had to cycle through 120 stocks until we were able to build a portfolio of 20 stocks based on our predefined rules.

We had 2 stumbling blocks: The first issue we had was due to our own rule of limiting each sector to a maximum of 3 stocks. Then the second major issue was lack of availability in the Trading 212 Pie.

A Quick Look Inside

We’re not applying any subjective analysis on these stocks for this experiment, but for curiosity let’s take a quick look at a handful of the stocks that made the cut.

Mohawk Industries (MHK)

The stock is US listed and is valued at the equivalent of £7.5 billion. Stockopedia are currently giving it a Stock Rank of 99.

They are a flooring manufacturing company who provide carpets, rugs, tiles, wood, and other flooring products.

Having no prior knowledge of this company and only looking at the StockReport it’s difficult to see why this company is ranked so highly.

It doesn’t look bad by any means but equally it doesn’t set the world alight. Stockopedia’s algorithm must be looking at much more datapoints than we are. 

It’s quite cheap, with an EV to EBITDA of just 10.48, and its business doesn’t seem to have been too badly impacted by Covid, with revenue down slightly.

If it wasn’t for this experiment we would disregard this stock – maybe to our disadvantage. But rules are rules, so it gets a place in the portfolio.

Kingfisher (KGF)

A company and industry that we know a little about already. Kingfisher is a home improvement company and is listed in the UK and owns B&Q, Screwfix, and some other brands that we’re not familiar with.

Its revenue hasn’t really gone anywhere in the last 5 years, but it has received a little boost from Covid due to people being stuck at home and doing more DIY.

The company looks to have strengthened its balance sheet with a huge increase in cash and therefore a reduction in net debt.

This looks to be a steady investment that won’t break the bank as the shares are relatively cheap with an EV to EBITDA of just 7.45.

Synnex (SNX)

We’re frequently drawn to tech stocks as they always seem to have the potential for supercharged growth, so a company like this in the portfolio is exciting.

The biggest challenge with tech stocks is understanding what they do.

When reading their business profile, all we see is gibberish, but the company is doing something right as their revenue has been surging over the last 5 years – but a sudden slowdown in 2020 and 2021 is perhaps due to Covid.

We’re not going to spend any time finding out exactly why this is, but it does seem odd – a lot of tech stocks have had super years with businesses rushing out to use the services of tech specialists.

Nevertheless, the company has continued to improve Earnings Per Share, and is forecast to continue doing so.

Surprisingly, the stock is dirt cheap, with an EV to EBITDA of just 4.59 and a PE ratio of just 5.7. It is very unusual for a tech stock to trade at such a cheap valuation.

Stockopedia are putting the technology sector average PE at almost 27, so Synnex could be a hidden gem.

CVS Health (CVS)

We can’t look at all the stocks, so let’s wrap it up with CVS Health. This is the biggest stock in the portfolio with an equivalent market cap of £68 billion.

We really like the look of this stock with its first impression. The company is a US based pharmacy business with almost 10,000 retail locations.

Healthcare is one of those essential products that is needed no matter the state of the economy and it would seem based on their revenue and earnings that Covid has significantly boosted their P&L.

Price-wise CVS looks cheap. The PE ratio is just 9.5 and its EV to EBITDA is 8.25. The one bad fundamental that stands out is its debt. Its gearing ratios are sky high and its Net debt is 4x operating profits. That would normally be a red flag.


Obviously, what we’ve done today is very basic. You might want to take this idea and add in some additional rules. Perhaps you want to automatically exclude stocks over a certain PE ratio or when debt exceeds X times the operating profit.

Whatever you want, you can do this on Stockopedia, so check them out with our special offer on the Offers page.

Will you be joining in with this experiment, and how well do you think the portfolio will do? Join the conversation in the comments below or over on YouTube.

Check out the MoneyUnshackled YouTube channel, with new videos released every Monday, Thursday and Saturday:

How Did Investors Do In 2020

2020 has been a year to forget – but on the flip side, stock market performance has been a rollercoaster, starting badly and finishing strongly. In normal times, stock markets are often correlated, which means if one particular region does well, others tend to perform strongly also.

For example, when the S&P 500 powers forward, indexes in Europe, the UK, and elsewhere also tend to do the same, and when the S&P does badly, these indexes also tend to struggle.

This has not been the case in 2020 at all – with an enormous range of performances between and within different asset classes. This has meant some investors have been kicking ass and taking names, whilst others have been left with their head in their hands, wondering why they didn’t diversify properly.

At the end of every year, it’s always a good idea to check your investment performance, and we like to compare it against a reasonable benchmark. There’s no point giving yourself a pat on the back for a 10% gain if the market was up 20%. Something like Vanguard’s FTSE All-world ETF is a good yardstick.

But in addition to this self-review, we’re interested in seeing how other investors have performed – just because we’re nosey!

Interactive Investor have just released what they’re calling the Private Investor Index, which gives us insight into how private investors are faring on that platform. In this post we’re going to look at the highlights of this information and take a quick look at how different asset types performed in 2020.

Interactive Investor is the UK’s second-largest investment platform for private investors and has the biggest investment range that we’ve seen. They have a fixed platform fee, so is amongst the cheapest platforms for investors with larger pot sizes. You can check them out here.

Average Returns

Overall, it seems that the average person didn’t perform well in 2020 with a median average return of just 1.8%.

Although this is low compared with typical stock market average returns, we are actually surprised how high it is because the UK stock market was smashing investor’s portfolios to pieces with dire performance.

The FTSE 100 was down -11.55% on a total return basis in 2020, with the FTSE All Share down -9.82%.

The FTSE is heavily weighted with old-school energy stocks like Shell and BP, and financials such as Lloyds Banking Group and HSBC, so recessions can and clearly have punished UK indexes. On that note, these sorts of stocks could be poised to do well during a recovery and have been doing awesome since the turn of the year in 2021 but that is a story for another day.

We know from other studies that there is lots of home bias with investors, so UK investors have way more UK exposure than what you would get with a global index. However, for the average investor to come in with a positive 1.8% return means that most are at least diversifying into other regions and asset classes, which is good to see.

Investment Performance By Age

Interactive Investor have kindly dived deeper into this analysis and broken performance down by age. And quite honestly, we are very surprised at the number of higher positive returns considering what we just said about UK stocks.


Investment Performance By Age In 2020

The crown for best age band goes to 18–24-year-olds, who clocked in with a very healthy return of 8.1%, and there is a really interesting trend of decreasing returns with increasing age. This even turns negative for those over 65 at -0.9%.

Interactive Investor’s own analysis of this data suggests that they give the credit of this strong performance by the youngsters to having the largest allocation to Investment Trusts, and further boosted by their overseas and alternative asset exposure.

We don’t talk much about Investment Trusts at Money Unshackled because we prefer passive investments, but clearly Investment Trusts are doing something right, at least in 2020.

According to JPMorgan, 2020 saw the largest ever outperformance of the FTSE All-Share index by investment trusts – the FTSE Equity Investment Instruments Index (FTSE EII) produced a total return of 17.8% vs. the FTSE All Share, which as a reminder was down -9.8%.

Going back to performance by age band, the overall trend of decreasing returns by age comes as no surprise.

Generally, older people de-risk their portfolios as they age because they have less time to recover from any catastrophic collapse in the markets, so are less likely to hold large positions in companies like the FAANG stocks or Tesla, which were stand out performers in 2020.

Older people also grew up in a time when foreign markets were much harder to invest in, so may be more likely to have a UK home bias, even to this day.

Also, we suspect that younger people were better able to take advantage of the extreme volatility that occurred around March time. Younger people are less likely to have existing large sums invested because they have had fewer years to accumulate wealth. So, new money invested for younger people when markets were very cheap will make up a larger part of their portfolios giving them more upside potential.

Conversely, older people would likely have experienced a large decline from the crash caused by Covid and then new money invested would be a smaller proportion of their overall wealth. This is why we don’t really pay much notice to new investors when they brag that they’ve made 25% this year. It’s easy to make big returns on new money.

Type Of Investment By Age

Another interesting set of data provided by Interactive Investor is the type of investment by age band.

Assets By Age In 2020

Cash is held at around 10% across the age bands. Interestingly, 10% is the allocation we suggest people hold here at Money Unshackled, so either everyone has been watching and reading our content or this is a coincidence – you decide 😊

Do bear in mind that this is just the assets held within Interactive Investor. Holding cash long-term in an investment platform is not a great idea because no interest is paid.

Moving on to equity, which we assume they just mean individual stocks: surprisingly the young guys have less than old ’uns – a lot less. The over 65s have almost 42% in stocks whereas the under 24s have just 25.5%.

Our best guess is that young people are more aware of the commission-free trading apps and are perhaps more likely to do their stock trading with apps like Freetrade and Stake. Both of these platforms are giving away free stocks when you use our link, so feel free to check those offers out on the Money Unshackled offers page.

ETP stands for Exchange Traded Product and includes ETFs and ETCs. We can’t believe how small a percentage these make up for investors across the age bands at just 6.0%. As far as we are concerned, ETFs are single-handedly the best investment product available. They give huge diversification, at dirt cheap fees, in almost any type of investment.

Funds seem to be evenly liked across the age bands. These often behave similar to ETFs if they are passive funds, but active funds are also very popular, although we don’t see that split from this particular set of data.

What we would have liked to see is funds broken down into more types – whether that be bonds, equity, or mixed, and whether they were active or passive.

Performance by Wealth

II have promised more analysis by wealth in the future, but for now they’ve said that the wealthiest customers on the platform (meaning £1 million+ accounts) made their presence felt with average gains of 8.7%.

This sounds like it might contradict what we said earlier about existing investors having taken large hits from the Covid crash. However, it is highly likely that someone who has built up an investment pot of over £1m knows a thing or two about successful investing or has outsourced it to a professional.

Active vs Passive

We all know that passive investing over the long-term is best, don’t we? Or is it? Well, in 2020, it seems that accolade goes to active investors, who Interactive Investor are defining as those who trade at least twice a month.

These active investors grew their portfolios by 6.3%, which smashed the 1.8% average.

Although active investors won this round, many studies have shown that a passive approach does perform best on average over the long-term, and we might chalk up 2020 as being an unusual year.

Battle Of The Genders

Men or women? Who’s best? We’ve looked at this fight before when we looked at ISA statistics but now II have chipped in and given their two pennies’ worth.

Men win this round with a 1.8% return vs. 1.4% for women.

This comes despite the fact that women had more investment trust exposure than men – 27.5% for women versus 20.7% allocation for men.

Who’s The Best: Regional Returns

Are Southerners better at investing than Northerners? Well, in 2020 they were. Londoners earned a decent return of 2.94%, which smashed the returns of the North West and North East at 0.17% and 0.26% respectively.

But the real investing champions were the Scots, who put us all to shame with a return of 3.22%.

Those in the Channel Islands beat everyone with a return of 4.56%, but with a population smaller than most towns we’re disqualifying them for not fielding a full team.

Asset Types: The Good And The Bad

Looking at total returns in pounds from another II article, the best performing stock market was China with an absolutely phenomenal return of 25.5%. Not bad considering the US has been stealing all the limelight for stock market gains.

The US has of course been doing very well themselves with the S&P 500 up almost 15%, and the Emerging Markets up about the same.

If you’ve seen our video on the Ultimate ETF portfolio you might recall that we’re going quite heavy on all 3 of these regions, because we’re expecting strong returns here for years to come.

And right near the bottom is the UK – but this could be a quick turnaround in the near future due to Covid vaccinations rolling out in 2021.

Bonds, whether that’s inflation linked, gilts, or corporate bonds, have all done very well in 2020.

Investors were spooked by the economic harm caused by Covid, and the monetary measures taken by Central Banks caused lots of money to flood into bonds and push up prices. It seems unlikely they will do well in the next few years with interest rates looking like they can’t fall any further, but who really knows?

And finally, gold had an awesome year, up over 20%. We never used to be gold’s biggest fans, but with all the debt and money printing that is taking place, we are well and truly converts. That’s why we now say hold 10% of a portfolio in precious metals to help protect the downside.

How have you done in 2020 and what was the main driver of that performance? Join the conversation in the comments below.

Performance data from Interactive Investor

Check out the MoneyUnshackled YouTube channel, with new videos released every Monday, Thursday and Saturday:

Should You Buy Premium Bonds

Should you buy Premium Bonds? Well, if you listen to your gran the answer will probably be yes, but if you listen to a mathematician who understands odds and median averages, then the answer is likely to be no.

We’ve been contemplating whether to do a post on Premium Bonds for a while now, and the reason we haven’t until now is because we always thought – who is silly enough to buy them?

But it turns out that Premium Bonds are owned by around 23 million people in the UK – that’s right, a third of the country! So, either there a lot of silly people in the UK, or we’re missing something.

In this post we’re going to look at Premium Bonds – what they are, the interest rate, who they’re for and who they’re not for, and everything else you need to know.

If by the end of this post you want to invest in the stock market instead, then check out the best Stocks and Shares ISAs here. Or alternatively, if you want experts to manage your investments, then Nutmeg is giving you the first 6 months without management fees when you use the link on the Money Unshackled offers page here.

What Are Premium Bonds?

The first thing that springs to mind when we think of bonds is a type of investment that pays interest. Usually at the end of a specified period you will get the face value of the bond back. In other words, they are essentially loans. The market value of a bond changes over time as it becomes more or less attractive to potential buyers, so if you decide to sell early you may get more or less than the face value.

However, Premium Bonds are different. The market value of a Premium Bond does not fluctuate, and you can cash it in at any time for the original value. Also, they don’t technically pay interest. Instead, each Premium Bond that you hold is entered into a monthly prize draw. And there you were, thinking this was a serious investment!

Premium Bonds are often referred to as a cross between a savings account and the lottery. It’s entirely possible to win a life-changing amount of money with them but we’ll soon look how likely (or should we say unlikely) this is. The difference with Premium Bonds is that unlike a traditional lottery, you never lose your stake, which is why Premium Bonds are often used as a savings account.

Where To Buy Premium Bonds?

Premium Bonds are issued by NS&I or the National Savings and Investments agency to call them by their full name. This is a government agency and can probably be best described as a ‘government savings bank’.

When you save with NS&I or buy their Premium Bonds, you are actually lending your money to the government.

The easiest way to buy Premium Bonds is directly on the NS&I website, and if you’ve found this article, we’ll assume you can search google and find it yourself. You can also buy over the phone and by post, but come on guys, who’s doing this in the 21st century?

What’s The Interest Rate (Prize Fund Rate)?

As of December 2020, the annual prize pool is 1.00%. If we consider a Premium Bond to be a type of Savings account, then this compares quite favourably. At time of writing, the best easy access online cash ISA on the market only pays just 0.4%.

1% might sound quite reasonable in today’s low interest environment but remember – this is an average pay out and you are likely to receive nothing.

When we consider that the odds of 1 Bond unit winning anything at all in any given month is 34,500 to 1, then Premium Bonds might not be as generous as first appear.

Historical Rates

What we’re looking at here is the annual prizes over the last 12 years. Today, the average prize is more than other available cash savings on the market, but from our memory you could have often beaten those historical average prize amounts. So, perhaps Premium Bonds are more competitive now than they’ve ever been.

How Are The Prizes Distributed?

Okay, so the mean average is 1%, but because there are some very large prizes this means there is less money for the other prize winners. Arguably, the median average is a better indication of what return you will get.

The mean average is what you’re probably used to by the word “average”. In this case you would take the total prize pool and divide by the number of Premium Bonds in circulation. So, with a current annual prize pool of around £1bn and roughly 100bn Premium Bonds, this is where the 1% mean average comes from.

The median average, however, is calculated by ranking the 100bn bonds in order of the biggest win to the lowest and taking the middle one, to establish what pay out the average person would get. This results in an exactly zero return.

In other words, the average pay-out is 1% if you include the overnight millionaires, but probability wise you will end up with precisely nothing for each individual bond held – much like a lottery ticket.

The top prize is £1m and there are 2 winners every month. Sounds awesome and this seems to be the main selling point used to entice potential savers. We’re not saying that NS&I are deliberately trying to mislead people, but we couldn’t find any easily presented information on the odds of winning each prize pool.

Prize Pool

Instead, they present this, which makes it appear that the prize pool is huge and that there are lots of winners.

With almost 3 million individual Premium Bonds each winning £25 or more it looks very generous. However, without context this doesn’t really say much at all – given there are over 100,000 million bonds in circulation.

We decided to crunch the numbers to work out what the chances are of winning each prize.

Odds of 1 Bond Winning in 1 Draw

The distribution of prizes changes slightly each month but for January 2021 the odds were as seen here.

What the table shows is the prize amounts and the number of pay-outs, with the lower prizes paid more frequently and the higher prizes increasingly rare. The next column shows the odds of winning this exact prize and the following column shows the odds of winning at least that amount.

The odds of winning the top £1m prize in a given month is 1 in over 50 Billion with a capital B. We both enjoy the occasional flutter, but to call this an outsider would be an understatement.

The next prize of £100k is paid out 4 times a month, and the odds of winning at least this amount still has astronomical odds of almost 17bn to 1. Even the odds of winning at least the lowest prize of £25 is unlikely with odds of 34,500 to 1.

What Are Your Odds Based On X Number Of Premium Bonds?

You won’t just own 1 Premium Bond. So, those probabilities are just the odds of 1 winning. You may own a few hundred or thousands. And there is a prize draw every month, so you will have multiple attempts to win.

Odds of Winning in 12 Months

This table shows what the odds are of you winning each prize if you hold the Premium Bonds for 12 months and therefore enter 12 draws. We’ve done this for a range of different Savings amounts.

If you had £100 you would only have a 1 in 42 million chance of taking the top prize. Even if you own £20,000 worth of Premium Bonds your chances of winning any of the top prizes are still minute, but you do stand a very good chance of winning multiple small prizes.

Before buying this quantity of Premium Bonds you should first consider the likely better returns available from the stock market.

What You’ll Win With Average Luck

Up until now we’ve talked about the probability of a bond winning a prize, but what is the probable return for a person based on the number of bonds they own.  The maths gets really complicated but fortunately money saving expert have hired some nerd to do it all for us.

Median Winnings

Using the calculator on that site we can see that someone with £100 with average luck will earn nothing. Someone with £1,000 would also likely earn nothing. Someone with £10,000 would likely earn just £75, and someone with £20,000 would likely earn £175 (still less than 1%).

Basically, the more bonds you own, the more likely it is that your returns are closer to the reported “interest” rate – though most people will win less.

Other Need-To-Knows

The minimum you can buy is £25 and the maximum is £50,000. All prizes are tax-free, and your money is 100% guaranteed by the Treasury.

Back in the day its tax-free status used to be a major benefit, but with the introduction of ISAs and personal savings allowances, it is quite easy to avoid paying tax on savings anyway.

Just like cash savings, the rate of return on a Premium Bond is unlikely to beat inflation over the long term. Inflation may be below 1% right now due to the Corona pandemic but on average you can expect it to be around 2-3%, so you will lose money in real terms – unless you hit the jackpot of course.

The Lottery vs Premium Bonds

According to the National Lottery, the odds of winning the Lotto jackpot are 1 in over 45m. Compare this to the odds of 1 bond winning the top prize, which is over 50 billion to 1.

To be fair though, this isn’t a like-for-like comparison because you don’t lose your stake with Premium Bonds, and there is a prize draw every month. But you do lose the chance to invest that money for better returns elsewhere, which you could have then used to buy Lotto tickets with!

Who Are Premium Bonds Good For?

If you don’t mind playing the odds and are happy to maybe get nothing, then Premium Bonds are an alternative to a bank savings account, with the very slim outside chance of making you rich.

So Premium Bonds are good if you want a bit of fun and are getting next to nothing on your savings in interest anyway. It must be a nice feeling if you get one of the big prizes.

Premium Bond prizes are tax-free, so if you pay tax on your savings because you earn more than your personal savings allowance, then it makes sense to own Premium Bonds if you want the safety of cash savings.

And finally, Premium Bonds are really best suited to those with more savings, say £5,000 or more. The more you can save, the closer you will get to the advertised prize fund rate.

Who Shouldn’t Buy Premium Bonds?

Other than a bit of cash set aside for current spending and an emergency fund, most people should be investing their money in assets like stocks, property, precious metals, and so on.

Only through investing can you achieve a good rate of return that will not only beat inflation long-term but could make you very wealthy.

Check out this video next, which covers the basics of how best to invest at all levels of knowledge, from noob to expert.

Do you own Premium Bonds and if so why? Join the conversation in the comments below.


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