Family Building Society - Windfall Bond - is it fair?

lajoux

Has anybody else noticed the anomalies in this product?
We have just learned that the 10,000 'tickets' which go into the Draw each month are not necessarily purchased by investors. The first Draw had just 27 eligible tickets i.e. Bonds actually purchased.
The second Draw had 680 eligible tickets. This seems to be
poor odds i.e. 9,000+ unsold 'tickets' against just a few. Also, and not mentioned in the accompanying literature, the administration of the Bond and the Draw has been handed over to an insurance company, at a premium. As this Bond is not being widely marketed now, the chances of winning seem to be getting even more remote.
Is this a win-win situation for the Society?

Is this a fair product. or something else?

jimjames

I can't see who administers the bond and draw has any impact on the fairness or otherwise.

I certainly wouldn't choose a product purely based on being in a draw for a prize.

planteria

this is via National Counties, is that right?
i haven't invested in anything like this myself, other than Premium Bonds in the past. i guess it's just about the odds/chances of a payment. arguably, with rates so low, there is little opportunity cost.

patientperson

planteria wrote: »

this is via National Counties, is that right?
i haven't invested in anything like this myself, other than Premium Bonds in the past. i guess it's just about the odds/chances of a payment. arguably, with rates so low, there is little opportunity cost.

Yes planteria .. owned by NCBS.

The windfall bond needs a £10,000 deposit for 0.5% interest.

As the familiar Dragons Den saying goes .. 'I,m Out'.

planteria

0.5%G Interest and a Prize Draw?
or a prize draw that pays out on 0.5% on average?

lajoux

Thanks for the comments. My main bone of contention is these 'ghost' tickets which are entered into the draw. If there is a raffle with a 1000 printed tickets and only 100 of them are sold then I'd feel I would have a really good chance of winning a prize. I would not expect the remaining 900 unsold tickets to be put into the hat.
Or don't I understand how raffles are conducted?:think:

colsten

lajoux wrote: »

Is this a fair product. or something else?

Or don't I understand how raffles are conducted?

It's their raffle, they make the rules (which are published here).

You don't have to participate if you don't like the rules.

PeacefulWaters

The prize pot is £80,000 a month. £960,000 a year. In addition to the 0.5% interest.

10,000 x £10k bonds = £100m, making the prize pot worth 0.96% (tax free).

If they haven't sold 10,000 bonds then maintaining the prize pot at £80k a month is financial suicide for them unless they enter the unsold bonds into the draw.

For example, 680 bonds = £6.8m invested. If they pay £960k a year in prizes on these that equates to over 14% in interest. So all 10,000 bonds get entered and if an unsold one wins no prize is payable.

It's statistically fair for the customer and financially sensible for the provider.

I just don't find it a very appealing way to save £10,000. Santander 123 and buying lottery tickets with the interest would offer similar value with instant access and a slim chance of becoming very rich.

planteria

PeacefulWaters wrote: »

...It's statistically fair for the customer and financially sensible for the provider.

I just don't find it a very appealing way to save £10,000. Santander 123 and buying lottery tickets with the interest would offer similar value with instant access and a slim chance of becoming very rich.

sounds right to me. and NCBS can't really be criticised.. just, perhaps, having their Windfall Bond avoided.

lajoux

Thanks again for all the input. I still think it's misleading of them to state that 13 prizes will be given in every month's draw when all 13 could be allocated to the unsold Bonds. We shall be moving our investment somewhere else, not that there are many options left!

jimjames

lajoux wrote: »

Thanks again for all the input. I still think it's misleading of them to state that 13 prizes will be given in every month's draw when all 13 could be allocated to the unsold Bonds. We shall be moving our investment somewhere else, not that there are many options left!

Well for £10k you can get 3% at Santander if you don't already have the account.

That's 6x as much interest per year.