Different Viewpoint on Premium Bonds

SandraX

When we had a lot of cash, I and my husband invest to the max in P/Bonds. We both got less back than the higher saving rates, but it was the element of the possibility of winning a big prize.

Nowadays we have about 10k each in PB's and get the odd 25 pounds prize which equates to about 1% I think as during the last 12 months we have both received 4 x 25 each.

My brother who is a higher rate taxpayer only has savings in PB's because of the higher rate tax.

Alternatively, bank your money and get a guaranteed return and maybe spend 2 quid a week on the lottery

Goodluck

dcweather

Judging by some of the responses there is a lack of understanding of the concept of gambling! Sure, if you want guarantee, don't buy them, especially if the £150 makes a life difference to you. But try telling the person who won a million the pitfalls of not going for that extra 0.3% !

eskbanker

dcweather wrote: »

Judging by some of the responses there is a lack of understanding of the concept of gambling! Sure, if you want guarantee, don't buy them, especially if the £150 makes a life difference to you. But try telling the person who won a million the pitfalls of not going for that extra 0.3% !

You'd have to find them first, not so easy when there are only 24 £1m prizes per year, from the circa 80,000,000,000 bonds in circulation....

As I said in response to your first post, those who hold them are by their nature likely to be converts to the idea of potentially winning big, but that doesn't necessarily mean that this preference is grounded in factual and impartial analysis of the options!

That doesn't mean there's anything wrong with having a gamble if you're going in with your eyes open, but the odds do fall off spectacularly once above the median average, as shown in the MSE-calculated odds for the return on a £40K holding over a year:

At least £250 99.4%
At least £350 93.3%
At least £400 84.6%
At least £450 71.6%
At least £500 55.8%
At least £750 7.44%
At least £1,000 3.03%
At least £1,500 1 in 130
At least £2,500 1 in 809
At least £5,000 1 in 835
At least £10,000 1 in 1,774
At least £25,000 1 in 4,168
At least £50,000 1 in 9,255
At least £100,000 1 in 23,743
At least £1,000,000 1 in 82,335

Reaper

dcweather wrote: »

Judging by some of the responses there is a lack of understanding of the concept of gambling! Sure, if you want guarantee, don't buy them, especially if the £150 makes a life difference to you. But try telling the person who won a million the pitfalls of not going for that extra 0.3% !

Gambling is an easy concept, probability is harder, and worse the human brain cannot comprehend large numbers, but let's try...

According to the MSE calculator if you splash out and buy the maximum £50k your chances of winning the £1m prize you mention after playing for one year are 1 in 65,635

For comparison over that same year you are more likely to:
1 in 2000 : need emergency treatment after being injured by a bed or pillow
1 in 7100 : killed by an accident at home
1 in 50,000 : killed while playing football
Source: https://www.bmj.com/content/suppl/2003/09/25/327.7417.694.DC1

jrs101

The chance of winning one million £ seems really quite a realistic probability when you invest 50K. 1 in 65000 ish odds seems really quite good to me.


Thoughts/comments ?

eskbanker

jrs101 wrote: »

The chance of winning one million £ seems really quite a realistic probability when you invest 50K. 1 in 65000 ish odds seems really quite good to me.

Thoughts/comments ?

If you like those odds then go for it, but did you read the previous post about how they compare to other extremely unlikely events?

Perhaps also worth noting that even though £1m has traditionally been seen as a massive life-changing amount of money (hence the term 'millionaire'), its real-terms value has obviously declined over the years with inflation, and in the context of those able to put £50K into PBs it's 'only' twenty times that stake. Would you put a fiver on at the bookies if you had a 1 in 65,000 chance of winning £100 (albeit you always get the stake back with PBs)?

Reaper

See my post immediately above yours. 1 in 65,635 sounds reasonable to you because you can't visualise how small a chance that actually is.

Albermarle

you invest 50K. 1 in 65000 ish odds seems really quite good to me.

It means the chance of a single bond winning the Million is 1 in 3,250,000,000, so not great odds really !

Shashy

jrs101 wrote: »

1 in 65000 ish odds seems really quite good to me.

They really really shouldn't seem good to you.

It's an infinitesimally small chance.

jrs101

Shashy wrote: »

They really really shouldn't seem good to you.

It's an infinitesimally small chance.

Compared to the lottery it isnt. And its safe too. And it typically pays out 1.4 or whatever it is.