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Premium Bonds as Income?
Comments
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AnotherJoe wrote: »Its not risk free. Its almost certain you'll lose 1-2% a year.I believe that Joe is referring to inflation risk - assuming annual inflation is in 2-3% territory, then winning an average of just over 1% in PB prizes means that your capital is losing value in real terms, even though it's preserved in absolute terms.
Sophistry on MSE? Never...:)
Inflation is a factor, not a risk, across the savings market.
I'd guess that 123mat123's risk issue is all about the risk to the capital - which, for the record, one can disagree with. With a PM apparently content to ignore the law of the land, do you really consider your government-based savings to be 100% risk-free, 123mat123?0 -
I would say that erosion of your capital in real terms is a risk, money illusion and all that.
The received wisdom among many, including actuaries, is that long dated index linked gilts are the risk free asset for pension funds. Return free too now.....
If you really think that the government are going to appropriate capital (other than by tax or stealth) then buy gold and/or emigrate.0 -
I'm sure if I could be bothered to trawl through your posting history then I'd find similar points being made that could be dismissed as pedantry, but personally I think that the differing types of risk should be understood and accepted by those looking to find a home for their money.Sophistry on MSE? Never...:)
The subject here is PBs, not savingsInflation is a factor, not a risk, across the savings market.
- as I recall there was some animated (and pedantic) discussion on an old previous thread about the distinction between the two....
Granted, it's not unreasonable to interpret 123mat123's reference to risk free as meaning 'no risk of capital loss' but that doesn't invalidate highlighting that there are other types of risk, perhaps even including 'Boris risk'!I'd guess that 123mat123's risk issue is all about the risk to the capital - which, for the record, one can disagree with. With a PM content to ignore the law of the land, do you really consider your government-based savings to be 100% risk-free, 123mat123?0 -
For the avoidance of doubt, that was a flippant comment (hence the wink), referring to a tediously pedantic debate I had on here ages ago with another poster about whether the variable nature of returns from PBs meant that they're most accurately pigeonholed as savings, investments, lotteries, something entirely unique, or some permutation of any or all of the above. Clearly their capital-protected status is a characteristic shared with savings accounts, but their unpredictable return obviously isn't.Yes, will everyone take note this thread is not about savings.
Really, Eskbanker!
However, there's little value in replaying a technical discussion about all that on here, there doesn't really seem to be much scope (or requirement) for debate about the fundamental nature of PBs in the context of this thread....0 -
Yes, the subject has, perhaps, had more than its fair share of MSE bandwidth - but that happens regularly with other subjects, too.
To address the novel point of the OP's OP, though:
Your OP suggests that whilst you are "serious", the thrill of the chase is there - admitted or not! With your "serious" hat on, OP, a full holding will deliver about 1.26% tax-free - and that is the basis for your "serious" comparison with other interest-bearing products.
As for the more vicarious side, you might become slightly deflated by the steady stream of £25 prizes but, one day, "It Could Be You"...:rotfl:0 -
I think the chances of getting an average of 1.4% per annum is decent if you have the maximum amount in premium bonds which I think is £50k. With small amounts invested you can go months or sometimes years without any winnings.
Or as in my case, you can get 100 in PBs- total. then first month you win 100. over the next decade you win 2x 25.0 -
I think the chances of getting an average of 1.4% per annum is decent if you have the maximum amount in premium bonds which I think is £50k. With small amounts invested you can go months or sometimes years without any winnings.Or as in my case, you can get 100 in PBs- total. then first month you win 100. over the next decade you win 2x 25.
Oh well, not many investments where you get your original stake back in a month. Looked at that way you are a perpetual winner...:rotfl:
As for Audaxer's assessment re: achieving 1.4% return. Huh!
90% of 1.4%, yes; 100% of 1.4%, no...:)0 -
..we use our PB returns to support our "income" since taking early retirement. We have both maxed out, and over the last few years we have had the "average" return, including a couple of £500's, but generally most months we get something, and the longest we have been without anything is 3 months. Obviously as we can't "invest" any more in PB's we accept the "capital" amount will be eaten away by inflation.
We do not put the "interest" into a separate "treats" account but we have thought about it.....0 -
There's also an element of fun and gambling in PBs. If your capital is eroded a little, that's better than blowing it away on horses or the Lottery. Somebody has to win the £1 million prize!0
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