Different Viewpoint on Premium Bonds

Terry_Towelling

There are about 2.9 million bond prizes per month and 2.8 million of those are for £25. On top of that, about 85% of the 'higher-value' prizes are just £50 and £100. With the maximum holding and average luck you might expect to achieve a return of 1.25% (tax-free) over the longer term. Yes, you might get a bigger prize but you might also go for an entire year and get nothing.

I had bonds when the max holding was £20K and then £30K - and the prize fund percentage was much higher and the minimum win was £50. I got a few wins in the early months and then everything dried up and I got nothing for quite some time. I've cashed them all in now.

If you pay higher-rate tax on your savings interest, PBs may work for you but, otherwise, you'd have to have above-average luck to get anywhere near the better savings rates that exist.

chucknorris

poppy10 wrote: »

On average, someone with £40,000 invested is more likely that not to win £500 or more a year, a 1.25% rate of return. That's not bad in today's market.

The return is well below the rate of inflation, so how is that 'not bad', I don't get out of bed with an inspiration of only losing small every day, so by my measure, it is actually 'bad'.

londoninvestor

jimjames wrote: »

If you have that much cash then I'd certainly be looking at investments for a portion of it

Absolutely - hence my comparison with instant-access and notice accounts. In my view PBs are competing for a space in the cash-like part of your portfolio, not the equity-like part.

TonyMMM

I use them as an easy (ish) access savjngs account to park surplus cash that will move on later .... the return I am getting is currently 1.3% . Tax and risk free that compares v well with any similar bank accounts.


Much depends on your tax rate and other investment stategy ... I certainly wouldn't recommend them as a place for all your cash.

Masomnia

I've got the full amount as I would end up paying tax on some/most of the interest over the year and once you take that into account on average it should work out similar to an instant access savings account (which I need as the money in theory is for a property purchase in the not to distant).

I must admit I like checking to see if I've won anything nice at the start of the month. I don't mind forgoing the certainty for that.

financialadvisorqld

agreed with stephen.

Reed_Richards

dcweather wrote: »

With current other instant access accounts no more than 1.8% at best I think that loss of maybe £150 per year is well worth the gamble on a bigger win.

If you want to gamble on a big win you could invest at 1.8% and spend your £150 a year on lottery tickets.

poppy10_2

Alexland wrote: »

Yes not bad but still less than inflation and there are likey better options

chucknorris wrote: »

The return is well below the rate of inflation, so how is that 'not bad'.

Any easy access savings account is going to pay well below inflation. Even the chart-topping Marcus account only pays 1.5%. The only way to keep up with inflation is to gamble in the stock market, or to lock your money away for a fixed term and hope that inflation and interest rates don't rise even further in the time you have fixed for

Thrugelmir

Reed_Richards wrote: »

If you want to gamble on a big win you could invest at 1.8% and spend your £150 a year on lottery tickets.

Only 12% of the amount spent on lottery tickets goes towards aiding the national deficit though. Wouldn't be so bad if the profit went into funding a UK based pension fund either, rather than Canadian.

Alexland

poppy10 wrote: »

Any easy access savings account is going to pay well below inflation. Even the chart-topping Marcus account only pays 1.5%.

Unfortunately we don't know enough about the OPs circumstances to understand why or if they need to keep such a high amount in easy access earning below inflation return.

poppy10 wrote: »

The only way to keep up with inflation is to gamble in the stock market, or to lock your money away for a fixed term and hope that inflation and interest rates don't rise even further in the time you have fixed for

Generally my experience is that 'gambling' on the stock market does not produce any returns! However if using sensible diversified investments you are at less risk of seeing your spending power erroded by inflation over the long term. Cash is not always safer than investments.

Alex