***Premium Bonds - Good value? ***

Gorgeous_George

The Premium Bonds prize fund is currently worth 1.8%. With December's prizes of £57.9 million the total 'invested' must be close to around £3,217 million.

For February and March the prize fund will be held at 1.8% and in April, a £25 prize is expected to be introduced.

With interest rates falling like stones, are Premium Bonds becoming a better gamble than ever before?

GG

itsallagame_2

I like them, especially in today’s climate of low interest rates and bank safety.


True it is a gamble but all you can potentially lose is a bit of interest, personally can’t be arsed to find highest rates atm.



So a :money: from me !

sons_2

It is an average interst rate earned based upon someone that has the full £30k allowance. In April they will more than likely drop the rate or return and the £25 prize will be intriduced at the expense of other prizes. They are safe but you can still get a higher interest rate with other savings. You would need to buck the odss and win big to benefit, saying that I think they have a place in a porfolio.

rb10

Remember that, as Martin explains in his article, the chances of you getting anywhere near a 1.8% return are very slim. This is because the figure used to calculate this is the total prize fund. However, this is not distributed evenly. The very small (and diminishing) number of large prizes increase the average (mean) return, whilst being heavily skewed, as you are far more likely to receive a very small value prize.

There are still many many rates available that far exceed even the published 1.8%, and even more that exceed the real expected rate.

I have nothing against people having, say, £100, as they are a bit of fun, but if you have more than this, it's effectively throwing money away.

withnell

But i thought they've agreed not to drop the interest rate?

Could you explain what you mean about the £25 being introduced "at the expense of other prizes" - surely it will just mean that the investment return curve will be narrower?

unhealthyman

They are a kind of psychological trick to make them seem like a good deal. That said, with interest rates as low as they are, taking a slight hit on interest in exchange for feeling a bit cheery is not the worst thing in the world. It can be quite fun imagining that you might win a load of money (and there is an outside chance that you will) and the excitement of receiving an envelope containing money (usually £50) is quite entertaining. It certainly isn't a logical place to save money though. Also, bear in mind that if you take the prizes and spend them, then you do not get any kind of compounding effect either.

It's particularly illogical putting a large sum of money in there though.

sons_2

withnell wrote: »

But i thought they've agreed not to drop the interest rate?

Could you explain what you mean about the £25 being introduced "at the expense of other prizes" - surely it will just mean that the investment return curve will be narrower?

They will reduce the number of £50 and £100 winners, they will not pay out any extra.

With regards the "interest" rate, they have said they will not drop it i Feb or March, it is sat above the base rate at the mo so I expect it to be dropped in April - in my opinion.

gozomark

just wondering - when was the last time, if ever, the payout exceeded base rate (other than just catching up with falls in base rate) ?

Gorgeous_George

I think it would be better to save the money and then gamble the interest on the Irish Lottery.

I'll keep my £500 in Premium Bonds just in case I get lucky.

If base rates are cut to 0% or thereabouts, it will be interesting to see how much they pay into the prize fund.

GG