Premium Bonds Calculator Discussion Area

wimbledonian

Your calculator suggests that the one £1 premium bond I bought when I was a child has a 100% certainty of winning £0. Admittedly this has proved correct over the last 40 years, and the probability of winning is probably lower than the boffins at CERN blowing up the universe, but there is still a chance of winning the jackpot. :jThis possibility, although maybe a little remote, has saved me losing thousands of pounds gambling, buying lottery tickets etc, and is the best investment I ever made.

Incidentally I found another way to keep my gambling to a minimum. I took a friend to the airport and on the way he realised he had forgotten to by his Lotto tickets for the period he is away. He got me to buy them for him. Now I have the excitement of seeing if he has won, without the expense of using my money to buy a ticket.

Not quite so exciting as what I used to do when the lottery started - writing down some numbers that I would have put if I had bought a ticket. If none of the numbers came up I had won £1, but if the numbers would have produced a winning I would have lost. Of course I won every week, but it was quite a close thing at times.

rb10

wimbledonian wrote: »

Your calculator suggests that the one £1 premium bond I bought when I was a child has a 100% certainty of winning £0. Admittedly this has proved correct over the last 40 years, and the probability of winning is probably lower than the boffins at CERN blowing up the universe, but there is still a chance of winning the jackpot. :j

Yes, but if you round the probability of winning £0, you will get 100%, as there's such a neglible chance of winning anything.

Don't sell it though! I hope you win something one day!

littlemissmoney

If I select £1,000 for a year as a basic rate tax payer it says "Put the money in a top savings account paying 2.8% and you’d earn £22.40. If you put the same amount in Premium Bonds there is an 60.7 % chance you will earn less than this."

If I select £1,000 for a year as a higher rate tax payer it says "Put the money in a top savings account paying 2.8% and you’d earn £16.80. If you put the same amount in Premium Bonds there is an 60.7 % chance you will earn less than this."

How can the two percentages in red be the same?

Aegis

littlemissmoney wrote: »

If I select £1,000 for a year as a basic rate tax payer it says "Put the money in a top savings account paying 2.8% and you’d earn £22.40. If you put the same amount in Premium Bonds there is an 60.7 % chance you will earn less than this."

If I select £1,000 for a year as a higher rate tax payer it says "Put the money in a top savings account paying 2.8% and you’d earn £16.80. If you put the same amount in Premium Bonds there is an 60.7 % chance you will earn less than this."

How can the two percentages in red be the same?

The minimum prize you can earn on premium bonds is £25, so the calculation is effectively telling you that with £1,000 worth of bonds, you have a 60.7% of earning nothing from them in a year.

Connologs

They can be the same, because if they were in premium bonds then they have the same chance of winning a £25 stake or above.

Premium bond winnings are tax free, so whether you are a higher rate tax payer or not has nothing to do with the amount you would win.

Hope this helps.

anandi_2

My approach is to hold sufficient bonds that the interest will equate to the lowest prize value as you would have a very good chance of winning at least a prize a year. If you held less than that then the interest your holding had accrued would be distributed amongst the other winners.

A comment I would make on the calculator is that a certain amount of bonds would win £1000 over five years but only £1500 over ten - I cannot believe that the chances of winning would have halved over the extra five years! It would have been interesting to see the effect reinvestment of winning bonds had on the final outcome?