MSE News: The seven deadly sins of premium bonds

Former_MSE_Guy

This is the discussion thread for the following MSE News Story:

"The reality is that at almost every turn, premium bonds disappoint, meaning savers get poor returns. And here's why ..."

Read the full story:

The seven deadly sins of premium bonds

poppy10_2

Premium bonds may be a bad investment in a high interest environment, but in today's climate where you earn next to nothing in savings account anyway, what's wrong with having a bit of fun on the premium bonds? Agreed you should max out your high-interest ISA accounts first, but after that there is hardly any account out there that makes it worthwhile saving your money.

The top 'clean' savings account currently pays a paltry 2.5%. For a higher-rate earner you end up with virtually nothing in interest after tax is taken into account. At least with the premium bonds you are no worse off, and stand a chance (however small) of making a big win.

Gorgeous_George

If you still don't get it, it is time to accept that you do not want to get it. You say that you are 'no worse off' - you clearly do not understand inflation. You most definitely ARE worse off (I typed that slowly so that it might sink in). RPI is 4.4%.

An excellent article Martin.

As a taxpayer, I would like the (£30K) limit abolishing. Let the fools be parted with even more money and some of the forthcoming tax rises may not be needed.

GG

StevieJ

Is that article not stating the obvious, a bit like if you play the lottery you are unlikely to win?

Old_Wrinkly

I think you need to re-read poppy10's post, GG.
It is not talking about inflation - we all know that most 'savings' accounts are in fact 'losings' accounts, taking that and income tax into consideration.
(And it is generally known that the PB prize fund is not what it was.)

Poppy10 was simply comparing the poor return for high-rate taxpayers (e.g. only half of the specified AER) from savings accounts in a low-interest environment against the chance of a win, and saying in that particular case, perhaps why not.
You might get a big win, you are almost certain to get some small wins from time to time (on a £30K holding), and it is easier than doing the lottery.

Edit:
As Martin says in the article,
"Yet as a serious form of savings, it's only currently worth it for top-rate (50%) taxpayers who've used their ISA allowance and are putting a good whack in."
and to be frank, I don't expect many of them actually consider it 'savings' as such.

karatedragon

My Dad won £10,250 only 7 months after taking out his bonds. Tell me of a savings account that pays £10,250 in 7 months on 5,000 then I will believe the country is worth bothering with.

We need the days of interest rates for savers at 10% like they were ages ago.

In any case it's not worth having savings really is it. If you do you can't claim benefits in Welfare Britain.

lilac_lady

While savings rates are so low, why not buy premium bonds?

CLAPTON

martins precise is simply wrong

premium bonds are not a form of saving; they are simply a way of gambling with the interest you would otherwise have received.

If you want to evaluate premium bonds then you need to compare the likely winning from bonds with the likely return if you gambled the equivalent 'lost' interest on the horses, national lottery etc.
As I've not done that I've no real idea.

opinions4u

lilac_lady wrote: »

While savings rates are so low, why not buy premium bonds?

Because the prize pot is only 1.5% of the amount invested, and I can earn more interest than that, after tax, in a savings account.

musehead

It's a mystery to me why there's a £30k limit on premium bond holdings. If the government abolished the limit they would make more money for almost no effort.

debbie42

CLAPTON wrote: »

premium bonds are not a form of saving; they are simply a way of gambling with the interest you would otherwise have received.

That's exactly how I described it to a friend recently: it sums it up perfectly, I think.