MSE News: The seven deadly sins of premium bonds

poppy10_2

Gorgeous_George wrote: »

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%.

So if I invest in a saving account rather than in premium bonds, will inflation magically become lower for me? :think:

RPI is 4.4% whether you invest in premium bonds or in a savings account. There is no savings account available paying anywhere near enough to keep with inflation. As I said, the top clean rate is 2.5%, which after tax is taken into account is under half the current inflation rate. You are still seeing the value of your money being eroded, just as you are with premium bonds. At least with premium bonds you have a (tiny) chance of winning big.

opinions4u

musehead wrote: »

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.

The limit is there to ensure that 40% / 50% taxpayers don't escape the clutches of HMRC too easily.

Gorgeous_George

poppy10 wrote: »

So if I invest in a saving account rather than in premium bonds, will inflation magically become lower for me? :think:

RPI is 4.4% whether you invest in premium bonds or in a savings account. There is no savings account available paying anywhere near enough to keep with inflation. As I said, the top clean rate is 2.5%, which after tax is taken into account is under half the current inflation rate. You are still seeing the value of your money being eroded, just as you are with premium bonds. At least with premium bonds you have a (tiny) chance of winning big.

Of course inflation will not change depending on where you save your money. NSandI do a RPI+1% tax free savings account but you need to tie moeny up for three or five years to get the full benefit of the account (bond to be precise).

The chance of winning big is better with many other forms of gambling.

I have £500 in PBs but I see them as gambling and I'm happy with that. I have ten times more in Zopa earning 6% after tax and bad debt. I am shifting longer term savings to NSandI RPI+1% bonds.

Finally, it is time that PBs were moved off this forum. It is clearly named Savings and Investments. If I discussed horse racing or fruit machine tactics on here my threads would be moved. It is not right that MSE should assist the Government in deluding the British public.

GG

Gorgeous_George

opinions4u wrote: »

The limit is there to ensure that 40% / 50% taxpayers don't escape the clutches of HMRC too easily.

Hmmm...

... but they take the tax before they set the tax-free 'interest' rate.

GG

dougz_2

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.

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.

Exactly, and premium bonds work out about the same rip off return as lottery tickets, as in both cases you are losing about 50% of your stake in house edge.

If people really must gamble foolishly on random events then you would get far better value at the bookmakers or casino. i.e casino table games with under 0.5% house edge would be at least 100 times cheaper way to gamble.

Old_Wrinkly

Gorgeous_George wrote: »

Finally, it is time that PBs were moved off this forum. It is clearly named Savings and Investments.

Are not 'investments' (as covered in this forum) simply a form of gambling?

If I discussed horse racing or fruit machine tactics on here my threads would be moved.

To where?

poppy10_2

Gorgeous_George wrote: »

NSandI do a RPI+1% tax free savings account

I've got £30k in that already. Managed to get in on the RPI+1.35% issue :dance:

Gorgeous_George wrote: »

I have £500 in PBs but I see them as gambling and I'm happy with that. I have ten times more in Zopa

If you invest your money by lending to chavs on Zopa you stand the risk of losing your original stake. It's not comparable to savings accounts or premium bonds, where the only way you can lose money is through inflation eroding the value of your currency.

Old_Wrinkly wrote: »

Gorgeous_George wrote: »

If I discussed horse racing or fruit machine tactics on here my threads would be moved.

To where?

To here, probably:
Sticky: Beginners Guide To Matched Betting On Horse Racing

ag359

dougz wrote: »

Exactly, and premium bonds work out about the same rip off return as lottery tickets, as in both cases you are losing about 50% of your stake in house edge.

If people really must gamble foolishly on random events then you would get far better value at the bookmakers or casino. i.e casino table games with under 0.5% house edge would be at least 100 times cheaper way to gamble.

Garbage. You're forgetting that if you lose at the bookmakers you don't get your stake back. If you 'lose' on premium bonds you still keep the money you invested.

In other words, At a casino with 0.5% house edge, the returns are 99.5% of total money staked. With premium bonds, the returns are 101.5% of total money 'staked'. (And for what it's worth, the national lottery is far worse than both - from memory the returns are only about 50% of total money staked)

dougz_2

ag359 wrote: »

Garbage. You're forgetting that if you lose at the bookmakers you don't get your stake back. If you 'lose' on premium bonds you still keep the money you invested.

It is you have not understood. With PBs your stake is the interest you would otherwise earn. If you do not win you lose all that stake.

lvader

Name a savings account that lets you withdraw your monthly interest without penalty and gives 3% per annum year in year out without having to move?