I hope someone can advise me on this as I have no clue.

Some months ago a bank in the UK went under and loads of people lost their savings, can't remember which bank sorry. I did not like the idea of the same thing happening to me and at the time was clueless about the impending economic chaos but feeling cautious, I put ALL my savings into UK government premium bonds after reading somewhere that government bonds are the only truly protected form of savings.

IF things go truly pear shaped and the US economy went bankrupt, it would likely happen over here in the UK too eventually. I read over on another thread that IN the event of a country going bankrupt, government funds basically dry up. Will my government bonds be protected in this instance, I am thinking that if government finances dried up/collapsed in they would simply hold on to them and not let me cash them in so I'd lose my savings ...?

What should I do with them ? I don't want my money in the bank but I'm not happy having it in cash in the house either . Should I cash them and if so, how long should I wait before doing so, what would be the "final sign" alerting me to get them liquidized fast and THEN what do I do with the money?

Cosmic,

You made a brilliant call in investment terms!

UK government bonds (also known as gilts) are for all intents and purposes unbreakable. They were introduced in the 17th century as a means to raise money for war, with the aim that the government would pay back that sum after a set time.

The UK government has since the 17th century been in all manner of wars as Im sure you know. Crimean, US revolution, WW1 and WW2. Despite all these seemingly armageddon-proportion events, the UK gov't has never, ever defaulted on a gilt.

In short, your money is as safe as it could possibly be.

If in the unthinkable event that the UK govt defaults, it will truly be armageddon. Frankly nobody knows what would happen, but money wouldn't be much use in such a situation. After all, what good is a bit of paper when the bullets are flying overhead!

(FYI gilts are up massively in the last few days due to market instability... you should have a nice surprise waiting for you if you check their value )

hi their.

im no expert, but i did work for premium bonds in their customer service centre for a small period of time.

we were told in training premium bonds are safe no matter what, as they are backed by the government - thats what we were told to inform people.

i dont know what would happen if the government actualy went bust, but im guessing that the bonds will always be their and they will always be able to pay them out as they can with guarenteed savings, good thing is that no matter how much bonds someone has the whole amount will be covered (£30000 aint alot to cover really)

edit: sorry, had to add, premium bonds dont make anything on intrest, they reward with monthly prizes.. its this reason that attracts alof of muslims to investing in premium bonds as they are more ethical in the eyes of their religions. If anything the rise in their value will make them a safer investment though, might make them raise the prizes if their in a good mood and raking it in.

(the odds are quite good for a monthly win if you have the full amount saved, extra £100 every few months maybe, but these cant be re invested into premium bonds after you hit the £30000 limit.)

[edit on 10-10-2008 by boaby_phet]

thanks , I can breathe a bit more now I guess.
How on earth can premium bonds rise in value though ? I mean if I had £5,ooo worth and cashed them in today I'd still only get £5,000 back. Unless the pound had strengthened then they aren't worth anything more than I paid for them....I did have INCOME bonds before these, they pay out interest every month, they are government backed too.
I haven't got the full amount and haven't won any prizes yet ! I basically got them as thought it was the safest place to stash my cash while effectively giving me thousands of chances to win the lottery !
I only keep a few hundred quid in the bank these days to cover direct debits.....I just don't trust them

Oh that means you have NS& I bonds, which are a different creature entirely. They dont appreciate, and in fact you lose money on inflation.

But they are safe.

Consider investing in gilts .

I am no expert - being an American with banking experience - but it sounds like the answer to your question depends on just how far things go.

If things merely slump but slowly recover, it would appear that you're probably in an excellent position.

However, if things truly crash, all falls apart, then it really won't matter WHAT you put your credits into. All credits will be worthless.

So again, it depends on how far things fall.

perhaps you could use them as toilet paper.
when tshtf they will be worthless.

At the moment, it's a safer investment.

If the UK government really did go "completely bankrupt" no financial investment, no monetary system, no savings initiative will be protected.

What are they going to pay you back with, carrots?

A complete meltdown of the £ would mean financial Armageddon. There literally wouldn't be any money. They cannot return a loan or investment if there is nothing to return.

Even if they did, what are you going to do with those bits of paper in an economy that has no financial basis?

If Gold and Silver are not safe (a physical mineral) why would a series of numbers be safe? That's all money now is, a series of designated numbers, that's what has caused all of this in the first place. It is not linked to any physical standard and therefore has no physical value. It's injected and inflated at will, not dependent on the value of anything other than what a government states.

I'm sorry to say it, but the only way to make your money work for you if this gets to the point of Armageddon is to buy physical objects that will be of use to you in the future, before it happens. The only things that will have value are physical things that serve a purpose to you.

Money is pointless and worthless beyond what it can do for you in your life. In a world without a stable economy, what it will do for you is even more limited.