Premium Bonds

Squarepush3r

Firstly, this is my first post, so Hi!!

More to the point, I'm a wee bit confused by something that appears on the surface to be completely and utterly bog standard and simple.
Can anyone tell me the basic pro's & cons of a bog standard normal Premium Bond?
The way I understand it..... I buy some premium bonds, let's say £100 worth.
I dunno if that gives me 100 chances or 10 chances, but basically, for that £100 I have 10 / 100 chances each month to win a prize. Ranging from £50 - £1,000,000.
If I run up the equivalent of the national debt during my credit card hopping escapades, I can cash them back in & get my £100 back.


So, have I got it in a nutshell, or is there more I should know? And is there a "better" place to buy them from? (So far I've only seen NS&I).

Any help will be greatly appreciated.

:j

jenniferpa

Only available from NS&I. There is a 3 months wait before PB's go into the draw. You have 100 chances, and any win is tax free. The average return is slightly over 3% at the moment I think, but that's average over everyone - you could easily never have a win.

YorkshireBoy

jenniferpa wrote:

There is a 3 months wait before PB's go into the draw.

I thought for a moment that they'd changed the rules, but on checking I see that...

Eligibility of Bonds for prizes
11. A Bond will be included in all draws in and from the second month after the month you buy it...

http://www.nsandi.co.uk/products/pb/tandc.jsp

...meaning that the "wait" is, at best, just over a month and at worst it's just under 2 months.

jenniferpa

Apologies - YorkshireBoy is quite right.

cheerfulcat

Squarepush3r wrote:

Firstly, this is my first post, so Hi!!

Hi

I'm a wee bit confused by something that appears on the surface to be completely and utterly bog standard and simple.
Can anyone tell me the basic pro's & cons of a bog standard normal Premium Bond?
The way I understand it..... I buy some premium bonds, let's say £100 worth.
I dunno if that gives me 100 chances or 10 chances, but basically, for that £100 I have 10 / 100 chances each month to win a prize. Ranging from £50 - £1,000,000.
If I run up the equivalent of the national debt during my credit card hopping escapades, I can cash them back in & get my £100 back.


So, have I got it in a nutshell, or is there more I should know? And is there a "better" place to buy them from? (So far I've only seen NS&I).

Premium Bonds are only issued by NS&I. They are now primarily a vehicle for Gordon Brown to borrow money cheaply; the overall interest rate is 2.9% ( it's just been reduced ), so really quite poor value for the lender/PB holder, especially since even that miserly rate is not guaranteed - there are plenty of people who won't win anything at all.

Each £1 bond has a chance of winning so £100 gets you 100 goes. There are indeed prizes ranging from £50 to £1 million but this is a little bit like those scratchcards which promise that you could win £25,000 or a flash car for a £1-a-minute phone call and then in the fine print you see that there are also 5000 prizes of a cheap camera...the system is designed so that most people who win will win only small prizes. Yes, you get your money back in nominal terms but in real terms you will be losing money if you don't win at a 5%-ish rate and, importantly, re-invest the winnings.

IMHO, PBs are OK ( but not great ) for higher rate taxpayers and for people who already have a wide spread of investments and for whom the maximum holding is spare money. Anyone who is trying to increase capital should look elsewhere.

HTH

Cheerfulcat

Stonk

cheerfulcat wrote:

the overall interest rate is 2.9% ( it's just been reduced

I believe it's actually 2.95%, having been recently reduced from 3.00%. Other than that, I'd say it's an accurate analysis.