Premium Bonds: Are they worth it? Discussion Area

markie76_2

the statistics stated are for holding either a £1 or £100 worth of premium bonds. I agree this therefore makes the probability of winning a prize low.

What about people who hold the maximum permitted holding?

The article refers to higher rate tax payers who may be maxed out on their ISA limits but I very much doubt they would run out to buy £100 worth of premium bonds in response.

I wholly agre the NSI website doesn't publicise the 'real' odds of a return on investment, but on the same hand does McDonalds advertise on its website that too much could be bad for you? No business would give negative information when it is trying to promote their business.

The simple answer is no and therefore stating that the odds of winning £1m on a £1 bond holding is 16bn to 1 just polarises a 'real' life situation and adds a touch of sensationalism to the article as you would expect from any good journalist. Yes I also agree that you get an element of feeling that it is a flutter compared to the lottery, but you don't lose your investment and therefore naturally the odds of winning the top prize are less. Do you actually know anyone who would be happy playing £5k, £10k or £30k a month on the lottery because the chances of winning the jackpot are only 14m to 1? (per £1)


In my opinion to make this article 'useful' to the reader why don't you come up with a dynamic calculator which calculates the 'real' odds of winning one of the prizes based on inputting the amount you hold.

This would then give a true and correct comparison of whether premium bonds are good or bad value based on the individuals holding.

So come on Martin, how about it?

You did tempt me with 'sexily geeky' number crunching so why not come up with the suggested calculator and make it XXX geeky analysis.

Milarky

Blue_splat wrote:

I was made redundant a couple of years ago and invested £15k in PBs. I won £50 a few times, but then the frequency dropped off. I remember a friend telling me that this happens with PBs. Even though ERNIE is supposed to be random, the draw seems to favour newer bonds. He had invested a similar amount and observed a similar pattern to me. He then cashed them in and bought a new £15k worth and lo and behold he enjoyed a few months of £50 and it tailed off again.

Anyone else notice this or am I a statistical anomaly?

What you are most likely to be observing is the effect of 'averaging' taking place. The longer the run of draws the more chances that a given month will not turn up a prize. So whatever trend was there all along merely asserts itself given enough time to observe it. The experience of multiple early wins is 'unrepresentative' of what follows (because on 15K your odds each month were only roughly 'evens') but as more 'samples' are taken you can no longer suspend your belief that you have a 'run' of luck.

(I now expect to get flamed by the 'Al ad hominen' brigade :eek:)

bulltraderpt

markie76 wrote:

the statistics stated are for holding either a £1 or £100 worth of premium bonds. I agree this therefore makes the probability of winning a prize low.

The simple answer is no and therefore stating that the odds of winning £1m on a £1 bond holding is 16bn to 1 just polarises a 'real' life situation and adds a touch of sensationalism to the article as you would expect from any journalist.

In my opinion to make this article 'useful' to the reader why don't you come up with a dynamic calculator where you can enter the size of your premium bond holding and it calculates your 'real' odds of winning one of the available prizes.

This would then be a true and correct comparison of whether premium bonds are good or bad value for you compared to other methods of saving.

So come Martin, how about it? You did tempt me with 'sexily geeky' number crunching so why come up with the suggested calculator and make it XXX geeky analysis.

I would like to think he will, but he occasionally appears on another money saving website and when asked to questions he never came back, so I wouldn't hold bank on it!

With that said, if people start to withdraw their bonds in droves because of his analysis, could it not be argued that this would increase your chances of winning, i.e. less bonds butthe same amount of prizes? :rolleyes:

cheerfulcat

markie76 wrote:

Yes I also agree that you get an element of feeling that it is a flutter compared to the lottery, but you don't lose your investment and therefore naturally the odds of winning the top prize are less.

But you do, as inflation eats away at the value of money. After 10 years of inflation at 3% ( historically very low btw ), your initial £30,000 is worth only £22,000 and change.

tarquincat

cheerfulcat wrote:

But you do, as inflation eats away at the value of money. After 10 years of inflation at 3% ( historically very low btw ), your initial £30,000 is worth only £22,000 and change.

That is assuming you win nothing over the 10 year period !

cheerfulcat

I'm just pointing out the effects of inflation. People keep saying things like " Oh well, if I don't win at least I get my money back " and indeed " you don't lose your investment " and it isn't true. You get back your money minus inflation.

tarquincat

cheerfulcat wrote:

I'm just pointing out the effects of inflation. People keep saying things like " Oh well, if I don't win at least I get my money back " and indeed " you don't lose your investment " and it isn't true. You get back your money minus inflation.

In fact to put some "nerdy" stuff back in.

If you win Martin's average 2.75 %, and those winnings also decrease by 3 %
Your pot would be £22,122 + £7658 = £ 29,780 after 10 years loosing £220 over 10 years (£22 per year), not bad risk for gambling on the big one.

SheepLady_2

I have just bought some PB's - not just because of the extra draws in December, but this did push me to act now rather than later.

I have only bought a small amount - equal to what I may spend over the year on the lottery... I shall not do the lottery anymore because I have lost so much over the years.

This way, I still have my investment in the bank providing the interest to buy lottery tickets/PB's - and I will still have the whole amount in PB's that I would be spending on lottery tickets.

Maybe I'd better admit to buying one Euro lottery ticket last week because of the huge prize... it wasnt won, was it...

theodora_2

I have had £7,000 Bonds in 2X£2000+£3000 in smaller blocks for 10 years. Averaged 4.5% tax free interest per annum on the lot but all wins came from largest block.
Cashed those and bought £8000 consecutive nos. 1st draw October. Won £550 (this month).
In spite of insistence that each bond has same chance have found wins came from large blocks - never from small blocks. The odds of no numbers in a consecutive block give you a better chance.

tarquincat

tarquincat wrote:

In fact to put some "nerdy" stuff back in.

If you win Martin's average 2.75 %, and those winnings also decrease by 3 %
Your pot would be £22,122 + £7658 = £ 29,780 after 10 years loosing £220 over 10 years (£22 per year), not bad risk for gambling on the big one.

The more I think about this, the more I am enjoying this. If you had £30,000 invested & won Martins' 2.75%, you would not be able to re-invest that unless they increased the maximum holding, so you would have to put that £825 into a savings account anyway, so even the winnings would not decrease in value !