Premium Bonds Article Discussion Area

badger09

polymaff said:

webwiz said:

polymaff said:

Phil3822 said:

Just reading through some of this and got me thinking. I have had £10000 in premium bonds for the past 14 months, during that time I have won £25 five times. £125 over the 14 months. Not sure if that’s ok or not and would benefit from any advise.  Thanks all,

The present effective rate of return on a large holding is 1.26%. Your £125 on £10,000 is bang on that figure.  OK, it took you just over the year, but you have somewhat less than a full holding.  All in all, a pretty typical performance.

That's not quite right. The effective rate on a large holding is a proportionate share of the total of the small prizes. A little of the 1.26% total prize money goes towards paying for the large prizes which nobody is likely to get. For a large holding the best way to think about is that your investment is in two parts. most of it will earn you just over 1% and the rest in in a lottery. for small holdings it's all in a lottery.

Very gratifying to see so much support for my approach.

To those, like webwiz, who've no recollection of my approach, I'll flesh out the matter.

There are two certainties about the current Premium Bond regime. One is that the prize fund rate is declared as 1.40%. The other is that the prize fund is split 5%-5%-90%.

The simplification I make - as an investor - about the split is that you die before you win anything out of the 5% tranches, so a reasonable assumption is that your yield is best thought of as 90% of the current prize fund rate.

I also addressed the issue of why smaller holdings get a worse deal - but that doesn't seem to be part of the issue - at this moment.

[ Still can't get single-line paragraph spacing to work!  Shift-Enter didn't fix it. EDIT: but re-re-editing did]

I'll simplify even further. I'll die before I win anything.

This was pointed out to me by bowlhead99 who kindly calculated that, in addition to the 63 years I'd already waited for a win, I 'only' had another 50 to go. Still... nice to have something to look forward to

slimwallet

Here are the returns that I plot for my in-laws for their 2 accounts. covering 63 and 30 month respectively.
You can see that the yield is higher for the £38k average , but that is weighted due to a £500 win. The average interest was calculated virtually on a monthly basis.
Basically you gamble for a big with your monthly interest.
There is no advantage for buying large blocks over smaller holdings of the same value, hence the name E.R.N.I.E. (the R standing for Random)
regards
Slimwallet

Year	Prizes	Duration	Avg Value	Interst rate
2015	£175	9 months	£30,853	0.4%
2016	£375	12 months	£33,439	1.1%
2017	£225	12 months	£32,948	0.7%
2018	£1,050	12 months	£49,775	2.1%
2019	£750	12 months	£40,583	1.8%
2020	£250	6 months	£33,698	1.5%
	£2,825		£38,132	1.4%
63 month average interest			Avg invest. & int. rate
Year	Prizes	Duration	Avg Value	Interst rate
2018	£425	12 months	£50,000	0.9%
2019	£700	12 months	£48,933	1.4%
2020	£250	6 months	£49,675	1.0%
	£550		£49,368	0.9%
30 month average interest			Avg invest. & int. rate

slimwallet

My mother had bonds for over 60 years and always thought she was going to have a BIG win. IT never happened.
Also I still have a £1 bond from circa 40 years ago that I recently found.
EARNIE would not tell me if its a winner, as they require documentation that I do not have. Will etc.

polymaff

slimwallet said:

My mother had bonds for over 60 years and always thought she was going to have a BIG win. IT never happened.
Also I still have a £1 bond from circa 40 years ago that I recently found.
EARNIE would not tell me if its a winner, as they require documentation that I do not have. Will etc.

I have a single bond from the original A series.  A real paper bond, too, so in these days of shortages, I'm covered for at least one wipe.

Nice freudian slip, that - EARNIE ...

MACKEM99

If I buy some this month I am aware they will be entered into the August draw.  I have an NS&I Account.  How late in the month can I buy them?

Thanks.

Paul_Herring

How late in the month can I buy them?

Tuesday 30th if you pay by debit card from your NS&I account I reckon. I'd get them Monday 29th, though, just in case...

Swipe

MACKEM99 said:

If I buy some this month I am aware they will be entered into the August draw.  I have an NS&I Account.  How late in the month can I buy them?

Thanks.

When I asked them, they told me any ordered on the last day of the month will go into the draw for the following month (skipping a calendar month of course).

Sea_Shell

Might buy a few of these if my current interest rates go much below 1%.

I know it's all about "luck", but with a minimum prize of £25, do you need at least £2000 worth to have any realistic chance of achieving the "rate" of 1.25%

I know I could go years and not win a bean, but is there a "sweet spot" to getting anywhere near it?

Depending where rates are when my next batch of RS' mature, I might be able to buy more...not sure about £50k though 

polymaff

Sea_Shell said:

Might buy a few of these if my current interest rates go much below 1%.

I know it's all about "luck", but with a minimum prize of £25, do you need at least £2000 worth to have any realistic chance of achieving the "rate" of 1.25%

I know I could go years and not win a bean, but is there a "sweet spot" to getting anywhere near it?

Depending where rates are when my next batch of RS' mature, I might be able to buy more...not sure about £50k though 

It isn't; DWYMB realistic; variable; no.  Look before you leap ...

eskbanker

Sea_Shell said:

I know it's all about "luck", but with a minimum prize of £25, do you need at least £2000 worth to have any realistic chance of achieving the "rate" of 1.25%

I know I could go years and not win a bean, but is there a "sweet spot" to getting anywhere near it?

There isn't really a sweet spot as such, but in general the more you have (and the longer you hold them) the closer your return will be to the average.  The returns are heavily influenced by the lumpiness of the prizes, i.e. the minimum being £25 - you can play about with the calculator at https://www.moneysavingexpert.com/savings/premium-bonds-calculator/ where you'll see that holding £2K worth for a year, you'd have a 37.5% chance of winning nothing (0% return), 36.2% chance of £25 (1.25%), and 26.3% of winning at least £50 (2.5+%), with no intermediate returns between these outcomes....