Premium Bonds Article Discussion Area

bigadaj

Missrockabilly wrote: »

Hello everyone,
We have the maximum £50,000 invested, only just added in time for 1st January 2016. This money is my inheritance since sadly loosing my late Mum. I already had a few hundred pounds in premium bonds, gradually built up during the last 50 odd years . It really has been a rubbish return so far, with the occasional 'expected' minor wins. We were going to give it one full year and then re-assess things. Now that I read Martin's report about it changing for the worse in June, I wonder if there will be a mass exodus. I can't understand why they would do this to us, knowing people can earn a lot more by investing elsewhere. Surely if the big investors pull out, they will have to change things to tempt people back.

Ns&i are typically given targets for the amount of money that they need to raise each year by the treasury/ government. There is currently a lot of money looking for a safe home, many governments are now borrowing at negative interest rates, ie they are being paid to hold money by institutions.

If this represents much if your wealth then premium bonds are a poor investment option, you might want to look at the 5% savings loophole article and thread to get a better return without too much hassle or complication.

TheButler45

I recently sold my house and am waiting to build a new one, so my wife and I have a lot of cash in our bank. Not only is not a great idea to leave more than £75,000 in one bank account but I also got a letter from my bank telling me that their rate was reducing to 0.2% which I thought was not that good. I know I could search around and get higher interest rates than that, but I need instant access so thought I would give Premium Bonds a go. Invested the full £50,000. Month 1 nothing, month 2 £525, month 3 £125 and this month £25. So I have earned £675 in 4 months. I may have been lucky but I am pretty happy with that, plus there is the little bit of excitement checking if you've won. I also work in a Post Office and a lot of my customers have Premium Bonds and most seem to be fairly happy with their returns. I think if you really want to get the most from your money then Premium Bonds are probably not the best investment, but if you just want easy risk free minor gamble then they are great.

carrotmuseum

I find Martin's assessment very negative. I have several savings accounts including a maxed out Santander 123. None of them will EVER payout £1M in interest!

I use premium bonds rather than playing the lottery so every pound bond I buy is ultimately refundable, and meantime the same pound is in the draw EVERY month. A pound on the lottery is a one off non-refundable gamble.

After about 10 years "investment" with a current total of £2000 I have had several small prizes and just has £25 which means I have got back all my investment in prize money. Had I played the lottery for 10 years I might have won more, might have won less, who knows? but the quid a week would have definitely gone for ever in lottery tickets.

Treat it a a bit of fun and realistic alternative to the National Lottery - the trick is not to consider it as part of a serious investment portfolio.

polymaff

carrotmuseum wrote: »

I find Martin's assessment very negative. I have several savings accounts including a maxed out Santander 123. None of them will EVER payout £1M in interest!

I use premium bonds rather than playing the lottery so every pound bond I buy is ultimately refundable, and meantime the same pound is in the draw EVERY month. A pound on the lottery is a one off non-refundable gamble.

After about 10 years "investment" with a current total of £2000 I have had several small prizes and just has £25 which means I have got back all my investment in prize money. Had I played the lottery for 10 years I might have won more, might have won less, who knows? but the quid a week would have definitely gone for ever in lottery tickets.

Treat it a a bit of fun and realistic alternative to the National Lottery - the trick is not to consider it as part of a serious investment portfolio.

It CAN be thought of as a serious part of a portfolio when properly evaluated. 1.125% tax-free, instant access.

SuperSecretSquirrel

carrotmuseum wrote: »

I use premium bonds rather than playing the lottery so every pound bond I buy is ultimately refundable, and meantime the same pound is in the draw EVERY month. A pound on the lottery is a one off non-refundable gamble.

The counterargument to this is that you could save your £2000 in accounts paying 3-5% interest and withdraw £2 a month to buy a lottery ticket. The interest earned on the savings would pay for the ticket and leave a little left over. Guaranteed profit if ignoring inflation (which we have to if we're swallowing the "PBs give you back what you put in plus any prizes" marketing shtick) plus better odds of winning a life changing amount. Sure you have to buy a new ticket each month, but the opportunity cost of no interest on your cash affects you each month too. The act of purchasing a new ticket regularly changes nothing.

Of course you could reach a point where you have more savings than there are homes for cash at 3%+, at which point it becomes a far less clean cut question. Faced with savings accounts at 0.1%, or basic current accounts paying 0%, the premium bonds would be a good shout. Somewhere in between and you'd need to run the numbers.

I personally have a little cash in PBs as I like the daydream of a million pound windfall, but am too lazy to buy a lotto ticket regularly. I'm happy with the tradeoff, but I don't pretend there isn't one. Premium bonds are rarely the best financial choice, but that doesn't stop me from holding some

Paul_Herring

SuperSecretSquirrel wrote: »

but am too lazy to buy a lotto ticket regularly

You know you could always set up a direct debit....

Devonian_Rodders

The article on Premium Bonds certainly highlights how people can be mislead into believing they have a BIG chance of winning £1m "with average luck" but that also applies to the lottery.
Over recent years there has been a sharp fall in the number of 'mid table' winnings, possibly because of the introduction of the extra £1m jackpot, and of course the lower end prizes.
I have bonds which go back to the late 1950's (letters and numbers) along with others which are prefixed with numbers, letters and other numbers, and have yet to get a prize from the originals.
Although it is stated Every bond has the same chance, it seems that older bonds are not winning the larger prizes. A check of the NS &I website will confirm this.

EachPenny

Devonian_Rodders wrote: »

I have bonds which go back to the late 1950's (letters and numbers) along with others which are prefixed with numbers, letters and other numbers, and have yet to get a prize from the originals.
Although it is stated Every bond has the same chance, it seems that older bonds are not winning the larger prizes. A check of the NS &I website will confirm this.

There is no con, it is all in the maths. There are fewer of the lower numbered bonds so there are fewer of them eligible to win prizes and so fewer appear in the published lists of winning bond numbers.

For example, when you got bonds in the late 1950's you probably thought a £10 bond was a big investment. That's 10 chances of winning. Today people might consider £1000 in a single bond to be a big investment - 1000 chances of winning. If you look at someone who has £1010 invested in this way then it is 100 times more likely that a winning bond will be in the more recent purchase than the 1950's one.

There are not many larger prizes in comparison to the total number of bonds, so an old low-numbered bond has to be very 'lucky' to appear in the published lists.

The only way of checking to see if older bonds were being discriminated against would be to look at the raw data produced by Ernie before it is filtered to remove the bond numbers which no longer exist. I'm not aware that NS&I publish that data anywhere (although it is checked to confirm randomness).

Many people who held low numbered bonds almost certainly could have become millionaires - had they not decided to give up and cash in their bonds, or pass away. Someone else had the luck to win that million.

Eco_Miser

I have bonds bought in the 50s, and one of them won in the 50s. I wouldn't have had more than ten at the time, so that's a lucky win.
None of the 21 bonds my parents bought for me over the years up to my 21st birthday have won anything since, let alone the million, and I've neither cashed them in nor passed away.

Crashy_Time

Eco_Miser wrote: »

I have bonds bought in the 50s, and one of them won in the 50s. I wouldn't have had more than ten at the time, so that's a lucky win.
None of the 21 bonds my parents bought for me over the years up to my 21st birthday have won anything since, let alone the million, and I've neither cashed them in nor passed away.

The £25 win seems to come up reasonably frequently for me, had one yesterday actually, does that make me lucky?