Premium Bonds Article Discussion Area

Doidle99

So Martin claims that Premium Bonds are absolutely safe but that has not been my experience.
I bought £40 of bonds back in the 1970s. We moved to Scotland in 1978. I received a £50 prize in the 1980s. After 1990, I heard nothing more from NS&I.  I came across the Bonds a few weeks ago in an old document box. I have my holders number but I had to apply for my Account number in order to check prizes further back than 6 months.  NS&I replied that they could not find an account in my name!  I pressed them and a cursory investigation revealed that my account had been closed and paid out in 1996 - for £2200!!  I can state with 100% certainty that I was not only unaware that I had won numerous small prizes and two £1000 prizes but also that I did not cash out my account and receive a cheque for £2200 as they claim.  I have all the bank statements for 1996 and there is no deposit for that amount. The problem is (probably) that the Post Office changed my Postcode in 1990 and I received no correspondence from them after that. The prizes must have gone to someone else at a different address and been illegally cashed.  NS&I are investigating but I am not hopeful of recovering the initial investment or the prizes.  

Swipe

Doidle99 said:

So Martin claims that Premium Bonds are absolutely safe but that has not been my experience.
I bought £40 of bonds back in the 1970s. We moved to Scotland in 1978. I received a £50 prize in the 1980s. After 1990, I heard nothing more from NS&I.  I came across the Bonds a few weeks ago in an old document box. I have my holders number but I had to apply for my Account number in order to check prizes further back than 6 months.  NS&I replied that they could not find an account in my name!  I pressed them and a cursory investigation revealed that my account had been closed and paid out in 1996 - for £2200!!  I can state with 100% certainty that I was not only unaware that I had won numerous small prizes and two £1000 prizes but also that I did not cash out my account and receive a cheque for £2200 as they claim.  I have all the bank statements for 1996 and there is no deposit for that amount. The problem is (probably) that the Post Office changed my Postcode in 1990 and I received no correspondence from them after that. The prizes must have gone to someone else at a different address and been illegally cashed.  NS&I are investigating but I am not hopeful of recovering the initial investment or the prizes.  

You'll find a number cases of this reported here in this forum for various products held long term at NS&I (prior to digitisation) and each one insisting that they were not paid out as stated. There appears to be a running theme here that extends beyond coincidence IMO.

wmb194

Swipe said:

Doidle99 said:

So Martin claims that Premium Bonds are absolutely safe but that has not been my experience.
I bought £40 of bonds back in the 1970s. We moved to Scotland in 1978. I received a £50 prize in the 1980s. After 1990, I heard nothing more from NS&I.  I came across the Bonds a few weeks ago in an old document box. I have my holders number but I had to apply for my Account number in order to check prizes further back than 6 months.  NS&I replied that they could not find an account in my name!  I pressed them and a cursory investigation revealed that my account had been closed and paid out in 1996 - for £2200!!  I can state with 100% certainty that I was not only unaware that I had won numerous small prizes and two £1000 prizes but also that I did not cash out my account and receive a cheque for £2200 as they claim.  I have all the bank statements for 1996 and there is no deposit for that amount. The problem is (probably) that the Post Office changed my Postcode in 1990 and I received no correspondence from them after that. The prizes must have gone to someone else at a different address and been illegally cashed.  NS&I are investigating but I am not hopeful of recovering the initial investment or the prizes.  

You'll find a number cases of this reported here in this forum for various products held long term at NS&I (prior to digitisation) and each one insisting that they were not paid out as stated. There appears to be a running theme here that extends beyond coincidence IMO.

The common thread is that people forget about their holdings for decades, find a certificate or a letter and then have perfect recall that they never cashed them in but NS&I says they were. In the meantime there are other people who say they have Premium Bonds from 1956 and that NS&I is perfectly well aware of them.

shinyclots

I've had the maximum premium bond holding for several years. My impression is that you don't get the expected return (I haven't actually calculated my overall winnings). However, I keep going for the thrill and you get something almost every month. I tried to look into things in more detail by writing a premium bond simulator dashboard. I think it works pretty well. At least it seems to give realistic numbers. Please have a look. It might help you decide if premium bonds are a good investment for you

https://drclongstaff-prem-bond-simulator.share.connect.posit.cloud/

eskbanker

Difficult to know which is most accurate or best but there are others already in existence, the most regularly quoted one being https://www.premiumbondsprizes.com/ although this just models short term returns.

When you say not getting the 'expected' return, much obviously depends on your expectations - it's a well-known fact that the headline prize rate is skewed by the very small number of very large prizes, and so the median is generally recognised as a more appropriate expectation than the mean, and hence 3.8% is a more realistic measure with a full holding over a year than the 4.35% nominal rate…

Yorkie1

You may well be a genuine poster, but I'm afraid I don't click on links from intranet sources I can't guarantee are safe.

shinyclots

I understand completely the concern about clicking on links and I'm not sure I would either.

I'm not a statistician and my simulator uses a basic approach to generating prizes by month over a year and also for any number of years (the default is 100). I speculate the pattern of returns conforms to a poisson distribution, but as I say I'm not a statistician.

The results do seem to bear out the idea that the advertised returns (4.35% - this a mean?) rely on some good luck and a few high value prizes (>£1000). Certainly the median would be lower.

eskbanker

Yes, the advertised rate (currently 4.35%) is the mean, i.e. it's the total prize value paid out over the year divided by the (weighted average) number of bonds in the draws.

The fact that only 1.2% of the prizes (by volume) account for the top 20% of prizes (by value) is what then skews the returns and makes the median a more realistic estimate of likely 'average luck' return.

subjecttocontract

For many of us it's the fact that our return is tax free that really makes it a must have. The 3.8% median return is equivalent to 6.33% taxable at 40%. Then in addition there's always the chance of a bigger prize, just a £1000 win can boost the annual return quite a lot.