Premium bonds 1.8% rate of interest

msfender

Fair point bresker. Makes you wonder who'd need our money more; banks for liquidity or the government to bail out the banks!!

EalingSaver

Aegis wrote: »

Most people won't even get close to the 1.8% either. The two top prizes skew the distribution for everyone else, and as I've pointed out a few times before this means that the median average would be a much better indication of expected winnings than the arithmetic mean in this case. Unfortunately I don't think I've seen the median winnings value published for Premium Bonds, however I wouldn't be surprised if it was down at 1.5% or below now.

I first dipped into premium bonds about Feb this year (full wack). As a higher rate taxpayer and with a need to spread money around it was a reasonable option for me at the time. I did however do it wtih my eyes open and go to the length of calculating what I might reasonably expect to get as a return (and monitor what I actually got). To do this I factored in only the lowest band prizes (up to £100). At the time, the return I could reasonable expect (subject to statistcal fluctuations of course) was equivalent to a taxed savings acct. paying 5.34%.

With this latest drop, they have increased the proportion paid out in lower prizes, to 95% of the pot. Regardless, by my calcs my 'expected' return is now equivalent to me to a taxed account paying 2.85% (95% of 1.8 gross being 1.71). I think I will be cashing mine in very shortly. BTW, I don't think the median is particularly important. Your expected/reasonable return (as a %age) is also very skewed by the size of your holding and the length you hold, because of the nature of discrete lump payments. If you have a substantial holding then I think using the %age value assigned to the lowest band prizes is a reasonable rough calculation of what you could expect providing you hold for a decent period.

For those saying they should scrap the £1m. Doesn't make sense. The contribution this would make to more lower prizes is absolutely minimal (see above). And remove the incentive which drives a lot of people to PBs in the first place (the extremely remote chance of getting something big)

Renovatio

Scrap one of the £1 Million prizes and have:
one £1M
one £500K
two £250K

then the usual £100k downwards...there is two great a disparity between the two £1 Million and the >£100K prizes at present.

PasturesNew

I wouldn't see them as an investment, just a little bit of "what if" fun with money you can get back.

For people who fork out £20/week on scratch cards and lottery tickets it can be a better way for them to gamble without losing their money.

It's like buying a lottery ticket, losing and STILL getting your £1 back.

I do wish the starting point wasn't £100 though, it used to be less.

Jonbvn

PasturesNew wrote: »

I wouldn't see them as an investment, just a little bit of "what if" fun with money you can get back.

Unfortunately a lot of people have a large portion of their life savings in PB's, given the huge amount held. I guess the gov't is looking to drive money out of PB's into the banks.

nigelF

Hmmmmm, interesting thought. I will be removing my £30k in January and putting into a Nationwide e-savings account. Even if it is a bit of fun, I've got to make up for my Iceland loss.

Baldur

nigelF wrote: »

Hmmmmm, interesting thought. I will be removing my £30k in January and putting into a Nationwide e-savings account. Even if it is a bit of fun, I've got to make up for my Iceland loss.

Suggest that you check out Nationwide's rate changes from Monday before planning to make any sort of profit from their accounts, e.g. e-Savings 3.05% - https://www.emoneyfacts.co.uk/news/savings-news.aspx

deep_pockets

i agree premium bonds are now a poor investment, due to the diminished prize fund pot.

but look at it from another way, its tax free and you dont have to declare it for tax credit claims!

therefore in my case i can keep my actual income through investments lower and keep my entitlement to tax credits higher and hopefully win a few prizes in the meantime, still protecting the capital for future years.

Not_Happy_4

Apologies as this is my first post and it's not exactly positive! checked just now the file in the nsandi.co.uk Website to have a browse through the usual almost 200 Top prizes of 5,000GBP+ and was utterly dismayed to find only 24 prizes!!! What is the Point?! I've just downloaded the form and am withdrawing 10,000GBP, it just isn't worth it anymore, I thought we were supposed to be affected by only 2% yet the prizes look dramatically cut!

Anyone else discovered the same yet today?

Etccarmageddon

yes the list of prizes is now shorter than Danny DeVito -it's a pants "investment"