Premium Bonds Article Discussion Area

RG2015

Paul_Herring said:

bogleboogle said:

Paul_Herring said:

If you gamble you are putting a stake on.

The stake, here, being the interest or gains you'd otherwise get sticking the money into a savings or investment product.

Except easy access savers currently pay an interest of approx. 0.01-0.2%, so your 'stake' is historically small. And when you consider your odds of beating that stake with, say, £10,000 in PBs are >99%, then it looks even less like gambling. 

I note you chose to (a) pick up on the low end of savings rates available (higher rates are available,) and (b) ignored investing completely.

It's gambling. No matter how much you want to pretend it isn't, it's gambling.

If I kept £10,000 in my current account, would you call it gambling?

eskbanker

I've never really understood the strength of desires to find a pigeonhole into which to put PBs!

The term 'gambling' has many connotations, rarely positive, and to some it implies risk, whereas to others it's simply a reflection of unpredictability of return - PBs indisputably entail variable returns with no risk of capital loss (other than real-terms value loss to inflation), but is there really any value in trying to attach contentious but essentially arbitrary labels?

Paul_Herring

RG2015 said:

Paul_Herring said:

bogleboogle said:

Paul_Herring said:

If you gamble you are putting a stake on.

The stake, here, being the interest or gains you'd otherwise get sticking the money into a savings or investment product.

Except easy access savers currently pay an interest of approx. 0.01-0.2%, so your 'stake' is historically small. And when you consider your odds of beating that stake with, say, £10,000 in PBs are >99%, then it looks even less like gambling. 

I note you chose to (a) pick up on the low end of savings rates available (higher rates are available,) and (b) ignored investing completely.

It's gambling. No matter how much you want to pretend it isn't, it's gambling.

If I kept £10,000 in my current account, would you call it gambling?

If you spent the interest you got from it on Lottery tickets (as I said in the bit of the quote that got chopped - and to which this part of the thread is talking about,) of course. Why wouldn't it be?

polymaff

Paul_Herring said:

bogleboogle said:

Paul_Herring said:

If you gamble you are putting a stake on.

The stake, here, being the interest or gains you'd otherwise get sticking the money into a savings or investment product.

Except easy access savers currently pay an interest of approx. 0.01-0.2%, so your 'stake' is historically small. And when you consider your odds of beating that stake with, say, £10,000 in PBs are >99%, then it looks even less like gambling. 

I note you chose to (a) pick up on the low end of savings rates available (higher rates are available,) and (b) ignored investing completely.

It's gambling. No matter how much you want to pretend it isn't, it's gambling.

If you accept that, say, £10,000+ in Premium Bonds will deliver a pretty regular income, tax-free of approximately 90% of the declared prize fund rate - then it isn't gambling.

Other than gambling that NS&I's boss's boss doesn't renege on that, Betty Martin, "100% safe".

eskbanker

polymaff said:
If you accept that, say, £10,000+ in Premium Bonds will deliver a pretty regular income, tax-free of approximately 90% of the declared prize fund rate - then it isn't gambling.

But, at the risk of going over old ground, a far-from-insignificant 13% of those holding £10K for five years will win less than 70% of that declared rate (the percentage winning less than 90% will obviously be higher), so it's hard to avoid the fundamental concept of luck when measuring the variable returns with PBs, whether or not we must persist in discussing if it's accurate or relevant to label it as gambling!

bogleboogle

Paul_Herring said:

bogleboogle said:

Paul_Herring said:

If you gamble you are putting a stake on.

The stake, here, being the interest or gains you'd otherwise get sticking the money into a savings or investment product.

Except easy access savers currently pay an interest of approx. 0.01-0.2%, so your 'stake' is historically small. And when you consider your odds of beating that stake with, say, £10,000 in PBs are >99%, then it looks even less like gambling. 

I note you chose to (a) pick up on the low end of savings rates available (higher rates are available,) and (b) ignored investing completely.

That's not the low end for easy access savers accounts. Higher rates might exist, but not much higher or many. I would go as far as to say that most easy access savers now pay 0.01-0.05% interest, so my range was pretty generous. 

polymaff

eskbanker said:

polymaff said:
If you accept that, say, £10,000+ in Premium Bonds will deliver a pretty regular income, tax-free of approximately 90% of the declared prize fund rate - then it isn't gambling.

But, at the risk of going over old ground, a far-from-insignificant 13% of those holding £10K for five years will win less than 70% of that declared rate (the percentage winning less than 90% will obviously be higher), so it's hard to avoid the fundamental concept of luck when measuring the variable returns with PBs, whether or not we must persist in discussing if it's accurate or relevant to label it as gambling!

That is so out of kilter with the posts in this thread that one can only marvel at the good fortune of those posters.

d63

maybe there should be a caveat for anyone looking to buying into premium bonds that like how they tell you when first starting out to invest in stocks and shares, one should be prepared to hold them for 5 or 10 years in order to smooth out the underperformance in lean years?

Paul_Herring

IanManc said:

That's not the low end for easy access savers accounts. Higher rates might exist, but not much higher or many. I would go as far as to say that most easy access savers now pay 0.01-0.05% interest, so my range was pretty generous. 

A quick search of Moneyfacts reveals that 234 easy access accounts are currently available, of which 6 pay 0%, 59 pay your range of .01% to .05%, and 169 pay more than your range, with the highest being NS&I Income Bonds at 1.16% and their Direct Saver paying 1%.

Or to put it more succinctly, you're wrong.  😉

Stop it Ian; you're spoiling his rhetoric with facts.

bogleboogle

IanManc said:

That's not the low end for easy access savers accounts. Higher rates might exist, but not much higher or many. I would go as far as to say that most easy access savers now pay 0.01-0.05% interest, so my range was pretty generous. 

A quick search of Moneyfacts reveals that 234 easy access accounts are currently available, of which 6 pay 0%, 59 pay your range of .01% to .05%, and 169 pay more than your range, with the highest being NS&I Income Bonds at 1.16% and their Direct Saver paying 1%.

Or to put it more succinctly, you're wrong.  😉

That is extremely misleading at best. 

To illustrate, let's take one example from your list of 169 easy access savers that apparently pay >0.05% interest from that website: "Barclays Bank Blue Rewards Saver". This account nominally pays a 0.5% interest rate. However, this is misleading for a number of reasons. Firstly, that account is only available to "Blue Rewards" members at Barclays (i.e. a very small portion of the population). Secondly, it's clearly not an "easy access" account - the 0.5% rate is ONLY if you make ZERO withdrawals. If you make even one withdrawal, the rate falls to 0.01%. 

So clearly that account has no place in a comparison of rates offered by "easy access savers accounts" and, as a result, your statistics are meaningless.