Premium Bonds: Are they worth it? Discussion Area

MSE_Jenny

This thread is specifically to discuss the content of the

Premium Bonds: Are they worth it?

article

To discuss or ask a question about it: click reply

Milarky

The 'nerdy' stuff at the bottom is exactly the kind of caveat that National Savings fail to give. (Well done whoever got that included!)

The basic conclusion would have to be that anyone should only hold the smallest possible 'stake' to be in the draw each month. That's £100 presently. If you win any prize at all (during your lifetime!) that will have turned in a 'profit' for you. But I'd just stick at that and put no more money in (personally I have £1 my Gran bought for me in 1966)

The more that people talk about PBs and examine them the more likely it is that NS&I will 'tweak' them to make the odds 'fairer'. They have done this following recent falls (and rises) in the interest rate - the distribution in 1997 for instance was something like 98% of prizes (£50 and £100) made up only 75% by value of the fund. Last time I looked this was '90 percent' by value but - lo and behold - they have tweaked this ratio yet again and it is now 87% by value. In general the further it falls below 100% the greater the reduction in effective rate talked about.

seven-day-weekend

I have £1500 invested in Premium Bonds (bought in January and September 2005 ) and I won £50 in May 2005 and I have just won another £50 this month.

I know I probably will not win anything else for years. I appreciate my money could be earning more in my High Interest Account (especially as I am a non-taxpayer). But I don't do the lottery as I don't agree with it (and anyway I live in Spain now, so I can't), and the Premium Bonds give me that very small chance of winning £1m that I'm prepared to give up my interest for.

And I can cash in my stake whenever I want, unlike the lottery.

IMO, nothing wrong with them as long as you don't consider them an investment that will make you a lot of money - merely an investment that MAY make you a lot of money.

robin58

I had £150 in Premium Bonds brought about 5 years ago never one on these.

Well I started to do a standing order for the bonds again in September last year for £50 a month, the lowest you can invest. Well I have about £750 in these now and have just won £50. So I am ahead in the game of % then, if you disregard the orignal £150.

I plan to stop at £1000 and that will be it.

I know that the odds are even higher with Premium Bonds, but I have, would you believe, won more % wise in such a shorter time on the bonds.

I have only won about £100 from the National Lottery since it started ( I have not done it every week I must admit).


Milarky, you will never win any money with the £1 Premium Bond. My mother had the odd £1 bond going back to when they were introduced. They never won a thing.

Having said that - good luck on a win.

I just look at it as a massive punt for £1 million.

And I still get the money back in the end.

Jake'sGran

I put £10,000 in quite some time ago but it is now worth £13,550. I have won a prize every month this year. When we came back from our holidays two weeks ago there were two envelopes, one for £50 and one for £100. It's just a little flutter that I can afford. I know I could probably have got a better return elsewhere but one month I might get really lucky. Incidentally, I automatically reinvest any winnings which means they are included in the following months draw i.e. they don't miss a month.

ashm1

Hi,

Surely this is just a government tool to get cheap credit. Am I missing something ?

£50 minimum win so 'low investors' keep the bonds in for as long as possible.


Kind regards,

Ashley.

Gorgeous_George

seven-day-weekend wrote:

Premium Bonds give me that very small chance of winning £1m that I'm prepared to give up my interest for.

And I can cash in my stake whenever I want, unlike the lottery.

IMO, nothing wrong with them as long as you don't consider them an investment that will make you a lot of money - merely an investment that MAY make you a lot of money.

1) You are happy to give up that bit of interest, so you seem to understand what Martin was saying.

2) but, you cannot cash in your stake as your real stake is the interest on the money that you put into PBs.

3) They are no more an investment than the National Lottery - or horse racing for that matter.

A top article once again Martin. Particularly the point that was clearly made that PBs are much more attractive to higher rate tax payers who have used up their ISA allowance (AND do not have a mortgage or any other borrowings.



GG

Lord_Gardener

It's just a gamble - I've had £800 invested for 12 years and have never won a bean!!

whambamboo

Milarky wrote:

The 'nerdy' stuff at the bottom is exactly the kind of caveat that National Savings fail to give. (Well done whoever got that included!)

meh, the nerdy stuff at the bottom is pretty much worthless.

It's the same as anything else: if there is a big payout it inflates the mean.

Just the same as if there are 10000 rich bankers earning £10m a year, they make the mean wage higher than the median.

But I don't quite see the point of the maths. The mean is the mean: you can't exclude half the prizes!

You might as well say if we took the top 20% richest people in the country away, we'd be poorer than Romania, it's just meaningless.

There is no reason to exclude part of the return, just because it's unlikely to happen. If we did this, we might just as well say we should take all the safety devices out of aeroplanes beause they are unlikely to crash.

People in every month!

The return is the return, and it's not great, so the first part of the article is good, and it is worth saying that most people will win less than the mean (it's just like a slot machine in this respect), but the stuff at the end about effective interest rates is very misleading.

webwiz

I was about to write pretty much what whambamboo has already said so I will just endorse it.

Premium Bonds are very suitable for two categories of saver:

1) Higher rate tax payers who have used up their ISA allowance (hopefully with a maxi) and prefer to get the interest on their "rainy day" money in lumps in relatively exciting prizes rather than just a book-keeping entry at the end of each year
2) Anyone who wants a flutter with their virtual interest

whosforachat

I do not understand how the fact that PB "prizes" are not taxed, makes them a worse investment. Surely this would make them better.