Premium Bonds Article Discussion Area

seven-day-weekend

My husband has just transferred some of his savings to Premium Bonds (probably cause LloydsTSB to go bankrupt :rotfl::eek:) .

We only have £3000 between us but have each won several small prizes since 2005. His latest purchase has doubled our holding.

We don't mind losing the interest for the sake of a chance to win a large amount and security for our cash, especially in the current climate.

Paul_Herring

seven-day-weekend wrote: »

My husband has just transferred some of his savings to Premium Bonds (probably cause LloydsTSB to go bankrupt :rotfl::eek:) .

We only have £3000 between us but have each won several small prizes since 2005. His latest purchase has doubled our holding.

We don't mind losing the interest for the sake of a chance to win a large amount and security for our cash, especially in the current climate.

As long as it's only part of your savings. Putting all of your savings into PB's is IMHO to your disadvantage.

seven-day-weekend

It's only part of our savings.








..........The rest is under the bed :eek::eek::rotfl::rotfl:

Deco

Mathematicaly there is no debate on whether Premium bonds give you good odds on your interest.
Like the lottery it is a losing gamble.

However despite knowing this and being a professional gamble I still play the lottery merely for enjoyment because if I do win am not gunna give a !!!! that I was actually entitled to a few million more.

So rather than comparing which gives the better value ISA's or PBs
A more worthy comparison would be, which would give better value the lottery or Premium Bonds?

The Lottery I think you have 55% of the prize pool given back to you (100% would be a break even gamble).
If we were given the total annual investment into PBs and then calculated the interest this would have received in the top savings account from that year then divided the annual prizepool by this number we would get a similar percentage.

I expect Premium Bonds would be better value than the lottery but about 40% of the lotteries profits goto charity so I would probably still be happier sticking with them and the lottery focuses more on the huge payments than premium bonds do which is the whole reasoning behind me taking this -EV gamble.
I dunno though if I'll get a 100% return or something huge I may switch and choose to lose £1 of intrest to them per week.

geoiain

Fantastic article and forum on PBs. I guess I know the answer to this before I ask, however...

I have £5000 in PBs and I have a loan with the AA, current balance around £4000. Should I cash in some PBs to pay off the loan?

Aegis

geoiain wrote: »

Fantastic article and forum on PBs. I guess I know the answer to this before I ask, however...

I have £5000 in PBs and I have a loan with the AA, current balance around £4000. Should I cash in some PBs to pay off the loan?

Almost certainly yes. Your expected winnings with PBs would probably be less than 3% at the moment (using the mode rather than the mean due to the skewed distribution), while the loan will almost certainly be costing you car more than that. Unless there's a really harsh early repayment charge, you're likely to be much better off paying off the loan.

Of course, the tricky part about Premium Bonds is that the random element takes this away from "you will be better off" and turns it into "you will probably be better off". As such, the ones who feel lucky might convince themselves that sticking with their gambling might do better than paying off short term loans...

North_Sea_Bubble

I think Premium Bonds should only be considered by debt-free 40% tax payers who have maxed-out their cash ISA allowance and other tax-free cash investments. I have had the full £30K allocation for 5 years winning £5500.

geoiain

Aegis wrote: »

Almost certainly yes. Your expected winnings with PBs would probably be less than 3% at the moment (using the mode rather than the mean due to the skewed distribution), while the loan will almost certainly be costing you car more than that. Unless there's a really harsh early repayment charge, you're likely to be much better off paying off the loan.

Of course, the tricky part about Premium Bonds is that the random element takes this away from "you will be better off" and turns it into "you will probably be better off". As such, the ones who feel lucky might convince themselves that sticking with their gambling might do better than paying off short term loans...

Thanks for your reply. I'll wait for the November draw and then head off to the post office for the repayment form. Unless of course I win the million!

Thanks again. :beer:

Jonbvn

North_Sea_Bubble wrote: »

I think Premium Bonds should only be considered by debt-free 40% tax payers who have maxed-out their cash ISA allowance and other tax-free cash investments. I have had the full £30K allocation for 5 years winning £5500.

Have you considered index linked saving certificates, also from NS&I? Tax-free and a good return (ATM).

North_Sea_Bubble

Jonbvn wrote: »

Have you considered index linked saving certificates, also from NS&I? Tax-free and a good return (ATM).

Yes. I have 15 years of investing in most issues of 2,3, & 5 year NS&I Index-Linked Tax Free Certs and letting the matured certs 'roll on'. Also depending on my earnings (hence tax position) in individual past years (it varies a lot) I have also invested in some NS&I Fixed Rate Tax Free certs. Together these certs make-up 40% of my savings.