Should there now be only one £1m prize per month for Premium Bonds with the interest rate cut to 1%?

cricidmuslibale

You will probably all know by now that the Premium Bonds interest rate was cut from 1.4% to 1% on December 1st and the odds of each £1 bond winning a prize have worsened from 24500 to 1 to 34500 to 1. With the new lower interest rate and poorer odds of winning a prize likely to continue for the foreseeable future at best or maybe even become lower and poorer still, would it not make sense at this point for there to be only one £1 million prize awarded each month and what was the second million pound prize divided up into:-
 
either (A) 20,000 more £50 prizes each month? I've never understood why exactly the same number of £50 prizes are awarded each month as £100 prizes and not at least twice as many of the former as the latter! 

or (B) 40,000 more £25 prizes each month, given that each £1 bond is far more likely to win a £25 prize than a prize of any higher value than this?

Any thoughts please? And do you think NS&I may presently be considering making a change along these lines in the near future?

cricidmuslibale

For what it's worth my own view is that there should now be only one £1 million prize per month and that the other million pounds should be divided up into 20,000 more £50 prizes. Clearly that would slightly improve the odds of each £1 bond winning a prize too. I really do hope NS&I may at least be considering either (A) or (B) above or doing something similar as only one £1 million pound prize is surely necessary to either (a) keep the total amount of money currently saved in Premium Bonds at roughly the same level or a bit lower if this is what NS&I would ideally prefer at present and/or (b) to attract some but not too many (for NS&I to be comfortable with) new Premium Bonds customers with the present interest rate being as low as 1%.

garmeg

Reducing the chance of a life changing win would make them less attractive, so it's a big fat no from me. 😀

cricidmuslibale

Thanks very much for your opinion, garmeg; you obviously fall into the camp of preferring the very tiniest possibility that you might win £1 million over having half that very tiniest possibility of winning £1 million but with a significantly increased chance of winning a much smaller monthly prize. I suspect the answer to my main question depends a lot on whether one saves money in Premium Bonds in the hope that one day you just might win that million pound top prize as you clearly do or whether one saves money in Premium Bonds first and foremost in order to get a reasonably regular (although far from guaranteed) tax-free income from much smaller prize amounts as I actually do.

eskbanker

cricidmuslibale said:

Thanks very much for your opinion, garmeg; you obviously fall into the camp of preferring the very tiniest possibility that you might win £1 million over having half that very tiniest possibility of winning £1 million but with a significantly increased chance of winning a much smaller monthly prize. I suspect the answer to my main question depends a lot on whether one saves money in Premium Bonds in the hope that one day you just might win that million pound top prize as you clearly do or whether one saves money in Premium Bonds first and foremost in order to get a reasonably regular (although far from guaranteed) tax-free income from much smaller prize amounts as I actually do.

But it wouldn't be a significantly increased chance of smaller prizes, as I've pointed out on more than one occasion to a poster who keeps floating this idea on the PB winners thread: https://forums.moneysavingexpert.com/discussion/comment/77468043#Comment_77468043

There were 2,868,182 prizes this month (97.9% being £25s), so an extra 20,000 prizes would only be a 0.7% increase, or 40,000 would be 1.4% more, not what most would consider a significant increase at all and certainly not a game-changer for those who've stuck with PBs through the latest rate cut....

2010

What` more likely to happen is they raise the amount of PB yo can hold.
Maybe £75k.

DiggerUK

Simple truth is it would make no difference to monies going in to PB's if they altered the prize bands.
These days it's the only sensible place for cash savings, it's a sellers market and NSI are selling PB's as fast as they can print them..._

EdGasketTheSecond

Premium bonds are supposed to be like a lottery, not an investment paying you regular income. On that basis they should keep the high prizes though I agree that a more distributed stream of smaller prizes would be desirable to many.

Senseicads

Why you trying to halve my chances of retiring early??

Apodemus

Personally, I would prefer additional prizes in the middle range - a win of £25k, £50k or £100k would make a significant difference to most people.  But, if I remember correctly, the second £1m prize was introduced to counter the advent of the National Lottery and the £1m prizes are perhaps the only reason that a lot of people even know about Premium Bonds, so I don't see them changing any time soon.   

eskbanker

EdGasketTheSecond said:

Premium bonds are supposed to be like a lottery, not an investment paying you regular income.

Says who?

The comparisons to lotteries and gambling usually generate more heat than light on here, but to me they've always been positioned as a means of protecting capital while simultaneously offering tax-free returns, albeit irregular ones (that become less irregular with larger holdings over longer periods of time), although they've always been difficult to pigeonhole for those feeling the need to try....