With the interest rate drop, is it worth buying Premium Bonds?

drc

Now that interest rates are going to come right down, is it worth investing in Premium Bonds? If I buy £30,000 worth of PB's am I likely to do better than keeping it in my First Direct account?

I don't have the time to organize a high fixed interest account and I'm not sure I trust the majority of banks offering the highest rates e.g. ING, Halifax etc.

Milarky

Probably not. Except where you have a flutter for the minimum £100 stake. PB 'rates' will drop by at least 1.5% (possibly 2%) next month from their current measley '2.85%' with the already-long odds on a small prize struggling to be maintained

Let's see - it would already cost '2.5%' to pay out £50 per £24,000 per month.

They've already pared the 'large' and medium prizes to just 10% of the total so if they cut PBs to (perhaps) '1.5%' (-1.35%) it isn't possible to continue paying prizes @ 24000:1 even if they were all £50. Let's assume the larger prize funds are increased to '10%' of the total each - that's a bite of 0.3%. If they trim that a bit to '8.33%' each, that's '0.25%' of the interest to pay these - and just 1.25% to pay smaller prizes. If all the prizes were £50 that would double the present odds to 48000:1

Now the odds were already pretty slim as it was - so doubling them hardly affects you if you just want a 'flutter' of a £100 stake.

BUT if you have £30,000 in bonds in such circumstances you are effectively halving an income - instead of winning an average of 15 prizes (mostly £50) you'll only average about 8 - an expected loss of at less £350. [That's peanuts to £30k stakeholders - but I think they are fooling themselves....

I don't have the time to organize a high fixed interest account and I'm not sure I trust the majority of banks offering the highest rates e.g. ING, Halifax etc.

Oh dear, that sounds ominous.

isofa

Very similar thread here http://forums.moneysavingexpert.com/showthread.html?t=1268423

I've posted the links to the main PB Discussion thread within it too.