Buying Premium Bonds online

stringer_bell

Eco_Miser wrote: »

It's £50k earning nothing for the whole time it's in Premium Bonds.

The first month you have no chance of a win, whereas in subsequent months you have a tiny chance.

I have a large amount of cash, full ISA, full pension.. maxed out my dividends for this year.. would rather not put it in stock market at the moment

its worth a punt I guess.. but yes, I know what you mean

steelbru

stringer_bell wrote: »

I have a large amount of cash, full ISA, full pension.. maxed out my dividends for this year.. would rather not put it in stock market at the moment

its worth a punt I guess.. but yes, I know what you mean

NS&I premium bonds pay 1.35%, chance of getting that virtually nil

NS&I income bonds pay 1.25%, chance of getting that 100%

Looks an easy choice to me :-)

eskbanker

steelbru wrote: »

NS&I premium bonds pay 1.35%, chance of getting that virtually nil

NS&I income bonds pay 1.25%, chance of getting that 100%

Looks an easy choice to me :-)

According to the MSE premium bond calculator (which is still only calibrated for the maximum pot being £40K), the chance of getting £500+ (i.e. 1.25%) is 46.2% and of £750+ (1.75%) is 5.97%, but yes, fundamentally, it's a gamble and no return at all is a (small) possibility.

Also worth bearing in mind (for a level comparison) that PB returns are tax-free, whereas the 1.25% income bonds interest is taxable, which effectively means that a basic rate taxpayer has a 78.2% chance of £40K in PBs outperforming or at least equalling the same net 1% from income bonds.

However, the 'wasted' month (or more) between buying PBs and being in a draw obviously affects these figures too, albeit less significantly so as time passes by....