Premium Bonds Article Discussion Area

Paul_Herring

Do I hear "No True Scotsman" being murmured?

eskbanker

polymaff said:

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.

Deliberately out of kilter with those perpetuating an ultimately futile bald-men-fighting-over-a-comb circular debate about whether PBs should be categorised as gambling, but also pointing out the logical absurdity of 'if you ignore the odds of something not happening, then it's a dead cert'!

dcs34

If you're money isn't earning 2.02% then you're not doing it right...and that's an easy access account (albeit variable rate)

bigadaj

dcs34 said:

If you're money isn't earning 2.02% then you're not doing it right...and that's an easy access account (albeit variable rate)

But an extra tenner a year isn't going to change too many people's lives.

bogleboogle

IanManc said:

bogleboogle said:

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. 

Your assertion was patently and obviously wrong and your attempt to justify it is pitiful. And everyone can see that.

I didn't attempt to justify my assertion; instead, I merely showed how pathetically flawed the 'evidence' you adduced in support of your (opposing) assertion was. And given your total inability to respond to the points raised or defend your woefully weak use of statistics, I'd say that's a job well done.

Best,
BB

eskbanker

IanManc said:

eskbanker said:

polymaff said:

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.

Deliberately out of kilter with those perpetuating an ultimately futile bald-men-fighting-over-a-comb circular debate about whether PBs should be categorised as gambling, but also pointing out the logical absurdity of 'if you ignore the odds of something not happening, then it's a dead cert'!

Do you argue over combs a lot Eskie?  😜

I'm in the "it is gambling" camp, but I can see that if you've got £50k of premium bonds you're much more likely to win around the average number of prizes a year and get close to the likely non-big-prize return of about 1.2%, which is so close to NS&I's easy access rate of 1.16% which is available to everyone with £50k that it is barely a gamble at all. As well as that, if you're a higher rate taxpayer then the tax free status of premium bonds means that the odds are well in your favour.

At the other end of the scale, if you've only £100 in premium bonds then you're very unlikely to win anything, while you could earn a whole £1 in interest a year on NS&I's easy access rate which is available to anyone with £1 or more. Really you'd be throwing away £1 each year rather than gambling with it, so you could argue that too isn't a gamble but a certain loss.

However, having £100 in Premium Bonds does let you dream of winning £1million at a net loss of about 8 pence per draw - and you've got to be it to win it.  😉

Yes, wouldn't disagree with any of that - there's no doubt that the more PBs you have and the longer you hold them, the closer to the mean return you're more likely to get, and therefore the odds of achieving the 'likely average' 1.26% continue to improve.  The point was more that (in that scenario of holding £10K for five years), only about 75% of holders would achieve a return in the range from 1% to 1.5%, so it's misleading to portray that sort of return as a given - as above I'm reluctant to use the emotive G word as this seems to set people off because of its connotations of recklessness and risk, but was simply observing that the returns on PBs are undeniably variable and therefore dependent on luck, even if the odds do change over time.

dcweather

This is one of the rare areas where I take issue with Martin's views. I can see the argument for small holdings of maybe less than £10k but not for larger ones. Whilst he points this out he never seems to put any weight on good luck, hope and dreams. It can really give people something to look forward to, even if they know their chances are slim. I mean come on, is it really worth chopping and changing to and from his various savings recommendations when the rates are 1% and we are arguing sometimes about 0.2% difference or less. I mean £20 a year difference on £10,000 vs a chance to win a bit more than that. I am very lucky and have the full quota. Last year i got about 0.9% return. In the first six months of this year I have 2% return. Largely due to winning seven £25 prizes in one month! It can happen. And it isn't really gambling because you keep your stake. Where else can you do that bet?

eskbanker

dcweather said:

he never seems to put any weight on good luck, hope and dreams. It can really give people something to look forward to, even if they know their chances are slim.

If only MSE said something like:

All my comparisons with savings products above are based on somebody who has average luck and indeed that is the sensible way to assess this. However it is impossible to ignore the fact that some will have better than average luck, and indeed that does need to be factored in to your decision.

Certainly if there is only a marginal difference in the amount you are likely to earn from savings compared with Premium Bonds, then you can factor in "the chance of winning large" as an additional fringe benefit of Premium Bonds, and it wouldn't be too bad to let that sway your decision marginally.

Mark1010

Bought NSI bonds in 1965. No wins and bonds remain nominal value.

Each Bond is valued @ £1.00 therefore if I had £1 in 1965 it would be valued at £16.00 today (2020) I would be better off just keeping that pound in my pocket.

NSI Bonds are not good financial instrument and should not be used as such.

I think this is a scam as, there is a very high chance you will never see a return and end up with less value than when you started. As proven with my experience.

Do not buy NSI bonds, stand more chance in winning a small amount on the lottery.

Paul_Herring

therefore if I had £1 in 1965 it would be valued at £16.00 today (2020) I would be better off just keeping that pound in my pocket.

Given the current odds are 1-24,500, then you're going to have to wait, on average, 2041 years before you win anything on PB's with that £. I gather the odds of winning much over that same period on the lottery with that same £ are going to be rather longer.

If you have £24,500 in there OTOH, you're going to win something each month, on average.