'£50 now or £1,000 in ten years?' poll discussion

JasX

kerri_gt wrote: »

I'd take the max I could now please .

so you're the one who voted £50 :cool:

yaris1

kerri_gt wrote: »

I'd take the max I could now please - I don't believe in such thing as a 'rock solid government guarantee' in 10yrs time there will no doubt be a diff governement or even if it's the same, they will find some way of going back on their word.

I agree, they always manage to find a loophole to let us down. Live for today, thats what I say (within reason of course)

wildthing01

i'd take £150 now if offered - £50 won't do much for me now, but £150 would be quite useful. the main problem i think is that £1000 in ten years is not that much really - if i've got to wait 10 years, i'd be wanting quite a bit more. even if it's guaranteed, i may not need it in 10 years, in which case i would rather have taken a smaller amount now, that i do need now. the way i see it (having spent many years as a student, not knowing where my next rent cheque would come from), i'll take what i can now, cos there'll always be another opportunity to make some more in the future.

hoping i've understood the question as maths not my strong point - and i have no idea what half these posts are on about!!!!

expat_mike

You only have to look at the trivial take up to Gordon Browns delayed state pension offer to see the flaws. On that scam I calculated that I'd have to wait until I was around 75 to break even by delaying my state pension till 70 for an increased one, and that was assuming I was still alive. Generally its best to take this sort of money now and invest it as at least your estate gets it if you die prematurely. In this case take £750 now and invest it or better yet to reduce a mortgage is a much better deal that waiting 10 years for £1,000 whatever your age. A bird in the hand comes to mind.

klint

I would take £500 now. I realise it would need to return 7.2% pa for it to reach £1000 in 10 years, which is slightly unlikely, but at least I will have it available for a rainy day during the next 10 years. Otherwise, I may have to borrow that £500 at a high rate if a disaster occurred.

cubehopper

£750 now. I'd rather have the option of potentially exceeding £1000 in 10 years through investing the money and maybe buying 1 or 2 lottery tickets/premium bonds.

Eco_Miser

Given the choice of £150 now or £1000 in 10 years time, I'd take the £1000.
Given the choice of £250 now, or £1000 in 10 years time, I'd take the £250.
So that's what I voted for.

I know that £250 is unlikely to grow to £1000 in 10 years, whereas £500 might, and £750 almost certainly will, but as I understood the question, you only get one offer, and I reckon I'd take £250 now if I were lucky enough to be offered it. I might not be around in 10 years time.

MSE_Martin

Sadly I agree with some of the responses I think people haven't quite answered the question- I suspect a lot more would take £250 if offered rather than wait for £1,000.

I think I'll try it again rephrased in a few months - we're going to do a new poll

jamesd

It appears that you're interested in evaluating propensity to save. If so, watch out for a mistake one survey that used this approach made. It offered a 10% return for waiting. Unfortunately the long term average return for the UK market is around 12% after inflation so what it ended up doing for informed decision-makers was asking whether you'd save or invest, with the correct long term choice for investors being to take the money. That rated them as low propensity to save even though they were making a sound long term investment decision.

You get similar bogus results in the descriptions some mortgage lenders are using today for charging higher interest rates for those who want an interest only mortgage. Some have justified it as charging more for those who are "less responsible", ignoring those who are making long term decisions to use pension or S&S ISA backed mortgages that are likely to leave them better off over the long term. A more strictly correct alternative reason is charging more for higher risk, because the mortgage balance won't drop during the term unless overpayments are made, so the mortgage lender has more capital on average exposed over the term of the mortgage.

Ignoring risk of death you might also want to watch out for values where return after waiting divided by (1.12 raised to the power of the number of years) is close to the value. Long term investors might pick any value where the return is at least as high as that number. Long term investors using Pensions Commission returns after inflation might substitute 1.04 or 1.03 for 1.12, since the Pensions Commission used 3-4% after inflation as the expected return for a balanced long term UK market pension investment (after making some assumptions about poorer future performance than past performance, based on UK demographic trends).

Lost2

I have voted