Premium Bond Calculator Discussion

[MSE Dan]

This thread is specifically to discuss the
Premium Bond Probability Calculator itself
It's been updated with the new £25 prize and other April 2009 changes

To discuss premium bonds themselves, see the Premium Bonds: Are they worth it? Discussion linked from the Premium Bonds: Are they worth it? Article

To take part in this discussion, click reply.

[purch]

I don't want to take part.............



Bumpy Bumpy

[baby_boomer]

I've always thought you had to be slightly dippy to invest in Premium Bonds.

Now that the difference in the rates payable on PBs and the rates available in the savings market is 3% & in the stock market even more you have to be even madder.

Higher rate taxpayers, the natural former friends of tax free PB prizes, should switch to income investments inside ISAs if they have any ISA allowance left.

[Jonbvn]

What's to discuss? They were a poor form of savings previously, and now they're even worse!

[Jonbvn]

Furthermore, MSE Martin let us know what he thinks of PB's in todays Telegraph.

"You're Fired!"
The chance of winning a prize on Premium Bonds is at the lowest ever level

[***xyz***]

Maybe, some people just like to have Premiums Bonds.

Maybe, some people don't worry about earning £10, £20, £30 interest per month.

Maybe, some people like to put their money into stocks and shares, others into Gold, others under the matress.

At the end of the day, it's not right or wrong, good or bad whether an individual decides to put their money into Premium Bonds.

They might win 10K, they might not. Shares might go up, they might not. Interest rates might go up, they might not.

I have them. I like them. I don't stay awake at night wondering if I could have made a couple of extra quid a day by putting the money somewhere else.

[Hungerdunger]

Originally Posted by ***xyz***

At the end of the day, it's not right or wrong, good or bad whether an individual decides to put their money into Premium Bonds.

I quite agree - just so long as they realise it's not a sensible place to put your money, if you really do need as much interest or "prizes" as possible

[realraw]

why does the calculator only go to 10 years? a lot of people have bonds for over 10 years.

[chuggy53]

I had ISA's (shares) and a bunch of money invested elsewhere ......my so called 'advisors' and experts investing my money nanaged to lose 10% of my monies whilst I went backpacking around the world.
I took the remainder out and boughtthe max entitlement of PB's
......I won hte usual £50/month fr 4 or 5 months, but for the last 10 months I havent won a THING
...but at least I still have my capital, eh? :roll:

maybe I'm just unlucky

has anyone calculated the chances of NOT winning in a 12 month period??????

[Hungerdunger]

Originally Posted by chuggy53

I had ISA's (shares) and a bunch of money invested elsewhere ......my so called 'advisors' and experts investing my money nanaged to lose 10% of my monies whilst I went backpacking around the world.
I took the remainder out

But until that moment you hadn't actually lost any money; it was just that the value of your shares was lower than before. If you'd held onto them for a few more years it's quite conceivable that they would have provided you with better "winnings" than your Premium Bonds.

Originally Posted by chuggy53

has anyone calculated the chances of NOT winning in a 12 month period??????

Yes, the calculator referred to in Post #1 does this.

[P4POB]

Would it be possible to extend the facility to display the odds of winning for a couple who have £30000 each invested in PB's (i.e. £60000 total)

[OscarElGrouch]

Originally Posted by P4POB

Would it be possible to extend the facility to display the odds of winning for a couple who have £30000 each invested in PB's (i.e. £60000 total)

I Agree. Also the comparison with a Cash ISA is not a fair one as it does not take account of the ISA's maximum limit. Having £30,000 in PB's is better than having £3,600 in an ISA no matter what Mr Lewis may say. (and the chances are that if you have the full PB amount you've also used your up your ISA allowance anyway.)

[Mikeil]

I think that Martin, with the Telegraph article and the calculator, has just endorsed the fact that Premium Bonds are really not the way to get rich quick. They are, however, a way to have a flutter in the background and the letter in the middle of the month every now and then does give me a smile. I am reasonably lucky!

I have seen no mention of the effect of inflation on the bonds. What, for example is the £1 bond that I was bought when I was ten worth in real terms now. Has anyone done any calculations? On second thoughts, perhaps it's best not to bother, I'll just be content to have an expensive smile every now and then!!!

[thorpeeedo]

Despite the fact that this is a product offered by NS&I and it's described as "bond", I think we all know really that Premium Bonds = gambling. As such I wish people would stop getting so worked up comparing them to a variety of savings and investment products. Yes, there might be a comparison to make against the stock market, but surely a much more interesting comparison of odds and results would be against the National Lottery? Or Bingo? Come on MSE, let's compare apples with apples!

[MSE Martin]

Originally Posted by thorpeeedo

Despite the fact that this is a product offered by NS&I and it's described as "bond", I think we all know really that Premium Bonds = gambling. As such I wish people would stop getting so worked up comparing them to a variety of savings and investment products. Yes, there might be a comparison to make against the stock market, but surely a much more interesting comparison of odds and results would be against the National Lottery? Or Bingo? Come on MSE, let's compare apples with apples!

You'll find just such a comparison here...

http://www.moneysavingexpert.com/new...-premium-bonds

[Loggy1948]

Of course the first thing you check out is what is the probability of winning given your own holding.

I have £6 premium bonds and have had these for years.

So when I use the calculator (for a sum which is quite simple as long as you have the different effective interest rates over time), applied over a month or in fact any other period I get:

£0 Exactly Negligible

At least £25 Negligible

...
...
At least £100,000 Negligible

At least £1,000,000 Negligible

Nice to know that probabilities don't add up to 1 sometimes.

Curiously trying £5 or £7 it seems to work.

So I guess that a > should be a >= or something like that. It's called a bug.

But this all avoids the point. The value of the premium bond is not the winnings. It is, as has already been pointed out, the enjoyment of anticipation that a small or large value cheque may drop through the postbox. It probably won't of course.

The longer you have the bond, the more enjoyment you get for your pound.

If you want to play the lottery, buy the ticket the day after the draw and you get a whole week's worth of fun. But with the lottery you have to purchase a new ticket each week.

With PBs you just buy one and then you are gambling the few pence interest every time. Much cheaper.

[Titan_UK]

The longer you have the bond, the more enjoyment you get for your pound.

eh? how do you figure? Sorry but I don't think you understand odds at all. The chances of winning are very small, every draw it remains very small, sure you aren't spending over and over but you are also missing out on any interest that could be accrued - at best you're 'enjoyment' is totally flatlined.

If you want to play the lottery, buy the ticket the day after the draw and you get a whole week's worth of fun. But with the lottery you have to purchase a new ticket each week.

With PBs you just buy one and then you are gambling the few pence interest every time. Much cheaper.

Except you miss a vital point - £1 a week flutter on the lottery gives you 1 in 14 million chance of winning every week for a total of £52 per year.

Sticking £1 a week in a Premium Bond will give you (drawn every month so £4) a staggering 1 in over 8 BILLION! Even after a year the odds of winning will be 7x higher than the lottery and you'd have to leave it there for 5 years to approach the odds of one week's lottery.

Don't delude yourself - stick it in a savings account instead. OR if you MUST have a flutter, do the lottery occasionally (Although there's better ways of gambling)

Regards
Titan

[caissedepargne]

So the odds of winning a prize each month are 24,000 to 1 according to the NS&I website and the PB calculator.

How come, for an investment of 12,000 pounds over 1 month, the PB calculator gives a 39% chance of winning a prize. Shouldn't this be 50:50?

[mikey72]

Originally Posted by Titan_UK

eh? how do you figure? Sorry but I don't think you understand odds at all. The chances of winning are very small, every draw it remains very small, sure you aren't spending over and over but you are also missing out on any interest that could be accrued - at best you're 'enjoyment' is totally flatlined.



Except you miss a vital point - £1 a week flutter on the lottery gives you 1 in 14 million chance of winning every week for a total of £52 per year.

Sticking £1 a week in a Premium Bond will give you (drawn every month so £4) a staggering 1 in over 8 BILLION! Even after a year the odds of winning will be 7x higher than the lottery and you'd have to leave it there for 5 years to approach the odds of one week's lottery.

Don't delude yourself - stick it in a savings account instead. OR if you MUST have a flutter, do the lottery occasionally (Although there's better ways of gambling)

Regards
Titan

In the premium bonds you only gamble with the interest you could earn, in the lottery you gamble with the stake.
You would have to invest about £2000 in premium bonds to get the £52 of interest you are gambling with in the lottery, not £1 a week. So you have a 63% chance of winning £25 back, and a 28% chance of breaking even. Not bad odds considering you also have a 1 in 1,701,499 of winning £1000000.

[seventy]

Everything has exceptions to the rule ,either way