Premium Bonds Article Discussion Area

slimwallet

Premium bonds security. Did you know that if you have some ones Holder's Number you can see online how much they have won over the last 6 months without any password access?

This could be of some concern for those going through divorce where a partner can see and probably work out from the 6 monthly winnings what investment they have (possibly stashed away?). There is no privacy for this information once someone has your holders number. So please be warned.

Jonbvn

Just read this editorial in the telegraph, which is calling MSE Martin a killjoy for being critical of PB's!

I think the Torygraph is completely wrong on this point. Martin specifically says that PB's are fine as a bit of fun, but are not a good method of saving/investment.

M3_Sussex

There's also an article about it here on ThisIsMoney.co.uk.

The_Bleurk

Killjoy is bang on.

I completely agree with the Telegraph editorial. This whole 'rocket science' based calculator nonsense is getting out of hand. As I have posted before, this complexity is not necessary to calculate likely returns, simple maths and a spreadsheet (or pencil and paper works well) are all that are needed.

Martin Lewis has proved absolutely nothing with this farce.

The premise of premium bonds is widely understood in principle by the public, as are the football pools and the lottery not to say horse racing, betting shops, casinos and online gambling.

Everyone is making a small marginal bet with Ernie that one day they will get lucky. Some you win and some you lose.

No one is forcing anyone to invest in PB's...

You pays your money and you takes your choice!

Paul_Herring

The_Bleurk wrote:

Martin Lewis has proved absolutely nothing with this farce.

Interesting that your only posts thus far have all been on this thread, and most have been either promoting Premium bonds or slating Martin's article.

You wouldn't happen to work for NS&I would you?

The premise of premium bonds is widely understood in principle by the public

No it isn't. Most don't realise that they're losing money by holding them.

Witness the "well at least I can get my stake back" comments when comparing them the lottery. And the confusion when they're confronted with the truth that they don't get their stake back.

The_Bleurk

No I do not work for NS&I.

I will slate and continue to slate what I consider to be misleading.

I am not specifically promoting Premium Bonds merely reporting facts and my own opinion that the forgone marginal interest on the bonds is a price worth paying.

Thanks.

Aegis

I think both of those articles completely missed the point. Premium bonds are NOT sold as what they are. If people were looking to play an ongoing lottery when they went in to the Premium Bond system, then fine, I doubt anyone here would have much to say about that beyond looking into the odds for themselves and deciding if it was worth it.

However, that's not how they're sold. They're sold as a tax free investment, and as far as investments go, they're extremely poor performers. I would go as far as to say that the majority of people in this country probably don't realise that Premium Bonds really are just a way of gambling in the long term without the hassle of actually having to buy a ticket every week. They genuinely think that they're putting money into a low-risk investment, and the phrase "tax-free" probably does the rest for them.

At some point I may buy a few premium bonds just to be in with a small chance of winning one of the larger prizes over time, but they will probably never form a large part of my investment portfolio because of the extremely low probability of decent growth.

I may reconsider when i'm in the higher-rate tax band, of course.

Jonbvn

Aegis wrote: »

I think both of those articles completely missed the point. Premium bonds are NOT sold as what they are. If people were looking to play an ongoing lottery when they went in to the Premium Bond system, then fine, I doubt anyone here would have much to say about that beyond looking into the odds for themselves and deciding if it was worth it.

However, that's not how they're sold. They're sold as a tax free investment, and as far as investments go, they're extremely poor performers. I would go as far as to say that the majority of people in this country probably don't realise that Premium Bonds really are just a way of gambling in the long term without the hassle of actually having to buy a ticket every week. They genuinely think that they're putting money into a low-risk investment, and the phrase "tax-free" probably does the rest for them.

Spot on! On the NS&I website, PB's are sold as tax-free investments. It also says "get your money back at any time".

As everbody agrees, PB's are fine as a bit of fun, but they a a poor investment, when compared to other vehicles. Therefore, MSE Martin is not a killjoy - he is just publicizing the fact that PB's are not a good investment. There is nothing wrong with telling the truth!

isofa

I have no problem with the more information and discussions brought about by articles, important to have all the facts before parting with your money.

However, surely anyone investing in any product, be it PBs, shares, standard accounts should (and hopefully will) review how the account works and the possible returns first? If they don't they are a fool in my opinion, and a fool and their money...

If you like the idea you invest, if not you don't - it's pretty simple, people are free to make up their own mind, NS&I don't hide facts about the product. I like the idea so I've invested, I like the fun aspect, but they certainly don't form a massive part of my investment portfolio.

You could argue as you might not "win" then it's not an investment, but I disagree, you might buy stocks and shares, or a bond which guarantees your capital return, but not any profits, it's a different beast, but returns are obviously very different.

No one holding PBs is ever gambling their stake, so you can't compare with the lottery in that way when you loose your stake when you buy your ticket. You are gambling your interest in effect, and the rate shown by NS&I is the average a holder should return, obviously many will return higher, many lower, in that respect it has a parallel with the lottery.

Everyone who has had good returns will say they are a good performer and vice-versa. Most people enjoy the fun aspect.

It's a calculated risk, like any financial product. I very much doubt it's the first port of call for people will small amounts of money as the returns would be too low. Most would start off with savings accounts, and only putting money into PBs when they have some spare cash. It's certainly how everyone I know uses them. If not they need better advice.

As I've said before, there will be millions of people loosing money in poor performing accounts because they don't realise or don't have the time to keep switching to better ones.

Aegis

No one holding PBs is ever gambling their stake (1), so you can't compare with the lottery in that way when you loose your stake when you buy your ticket. You are gambling your interest in effect (2), and the rate shown by NS&I is the average a holder should return, obviously many will return higher, many lower, in that respect it has a parallel with the lottery.

Surely (1) and (2) are mutually exclusive statements in this particular case, as your interest is your stake, not your deposit required to get the bonds in the first place?

For a basic rate tax payer, that means that their stake is something in the region of 5.2% of the money equivalent in bonds they hold per year, which equates to roughly £1550 for someone with the full investment of £30k. If such an individual were to play the lottery each year instead, then to play once a week all year would be £52 total for each line of numbers they chose. For someone to be wagering as much as the full-investors do in the premium bonds, they'd need to buy 30 lines of numbers every week, and most people would tell them that that's not the best investment in the world (rightly so, as the odds are probably somewhat worse with the lottery).

In any case, the comparison was just to point out what someone would need to do with the lottery in order to gamble as much as they do when fully invested in premium bonds. I think you'll agree that it's a lot of money we're talking about, and you definitely risk your stake in both cases.