Premium Bonds Article Discussion Area

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.

eskbanker

Mark1010 said:

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.

Oh dear, yet another one apparently unable to understand odds (or the meaning of the word 'scam')!

Out of curiosity, where do you believe you can put your money where it'll keep pace with long-term inflation without risking capital loss?

polymaff

Mark1010 said:

... 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.

Even assuming that the pocket remained unlaundered for all those years - the purchasing - as against antique - value today would be much less, not more, than the  £1. Try finding 20 litres of petrol for £1 in 2020.

Then there's the cost of redemption. ... 

Mark1010

polymaff said:

Mark1010 said:

... 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.

Even assuming that the pocket remained unlaundered for all those years - the purchasing - as against antique - value today would be much less, not more, than the  £1. Try finding 20 litres of petrol for £1 in 2020.

Then there's the cost of redemption. ... 

eskbanker said:

Mark1010 said:

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.

Oh dear, yet another one apparently unable to understand odds (or the meaning of the word 'scam')!

Out of curiosity, where do you believe you can put your money where it'll keep pace with long-term inflation without risking capital loss?

eskbanker said:

Mark1010 said:

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.

Oh dear, yet another one apparently unable to understand odds (or the meaning of the word 'scam')!

Out of curiosity, where do you believe you can put your money where it'll keep pace with long-term inflation without risking capital loss?

Hmm, another person apparently that does not know when they are being scammed... (a dishonest scheme; a fraud).

"Out of curiosity, where do you believe you can put your money where it'll keep pace with long-term inflation without risking capital loss?" Answer: Gold

The buying power of £1 in 1965 is not the same as today in 2020. There is a thing called inflation, look it up.

eskbanker

Mark1010 said:
Hmm, another person apparently that does not know when they are being scammed... (a dishonest scheme; a fraud).

Dishonest and fraudulent in what way exactly?  The published odds are clear - if you have a minuscule holding of premium bonds then the odds of any sort of return are also minuscule, although a tiny percentage of such holders will win proportionately massive prizes (even a minimum £25 prize from a £1 bond is a 2500% return), so the numbers game doesn't favour those not using them as a 'financial instrument' but just holding a token amount for sentimental reasons or in the very slim hope of a huge prize.  On the other hand, those with substantial holdings are highly likely to achieve a long-term return close to the median average of about 1.25% annual return, as you'll see from https://forums.moneysavingexpert.com/discussion/81778/premium-bond-winner#latest

Mark1010 said:
"Out of curiosity, where do you believe you can put your money where it'll keep pace with long-term inflation without risking capital loss?" Answer: Gold

Haha, good one!  There are never any drops in the gold price of course.... <facepalm>

Mark1010

polymaff said:

Mark1010 said:

... 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.

Even assuming that the pocket remained unlaundered for all those years - the purchasing - as against antique - value today would be much less, not more, than the  £1. Try finding 20 litres of petrol for £1 in 2020.

Then there's the cost of redemption. ... 

The office of Nations Statics says with the rate of inflation, the purchasing power of £1 in 1965 equals to the purchasing power of £19.49p in 2020.

"Try finding 20 litres of petrol for £1 in 2020" (I bet you could have bought 20 litres of petrol in 1965 for a £1

So why buy bonds knowing that 40 years down the line with inflation, you will get back less purchasing power with the capital invested than what you had before.

The only value in bonds is wishing that you win something, but its really hard to do that as the only ones that really have a chance are those that put in a very large capital. (Increasing their chances of winning)

Cant believe this has being going on so many years.

Even the banks adjusted for inflation when they were paying out PPI.

Bonds wants you to invest with them with no inflation adjustments, and advocates the more you buy, the more chance you have to win!... Sound scammy to me.