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

EdGasketTheSecond

eskbanker said:

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....

You are effectively gambling your foregone interest on the capital in the hope of winning a prize. The fact that the largest prize is £1 million and the odds of winning are slim would seem to make a lottery a reasonable analogy albeit you won't lose your initial capital except to inflation.

eskbanker

EdGasketTheSecond said:

eskbanker said:

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....

You are effectively gambling your foregone interest on the capital in the hope of winning a prize. The fact that the largest prize is £1 million and the odds of winning are slim would seem to make a lottery a reasonable analogy albeit you won't lose your initial capital except to inflation.

The analogy doesn't really work (as well as capital retention, there is a reasonably predictable return available on decent-sized holdings so it's not all about tiny chances of the big one, and therefore many do legitimately consider them as a valid alternative to traditional savings, especially given relative current rates), but my question was primarily about your use of how they're apparently 'supposed to be like a lottery', who's asserted this?

EdGasketTheSecond

eskbanker said:

EdGasketTheSecond said:

eskbanker said:

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....

You are effectively gambling your foregone interest on the capital in the hope of winning a prize. The fact that the largest prize is £1 million and the odds of winning are slim would seem to make a lottery a reasonable analogy albeit you won't lose your initial capital except to inflation.

The analogy doesn't really work (as well as capital retention, there is a reasonably predictable return available on decent-sized holdings so it's not all about tiny chances of the big one, and therefore many do legitimately consider them as a valid alternative to traditional savings, especially given relative current rates), but my question was primarily about your use of how they're apparently 'supposed to be like a lottery', who's asserted this?

I think its a good analogy because with a lottery you also usually have a number of small prizes so with decent-sized holdings of tickets you might have a more predictable return.

I asserted this? Do you have a problem with that?

eskbanker

EdGasketTheSecond said:

eskbanker said:

EdGasketTheSecond said:

eskbanker said:

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....

You are effectively gambling your foregone interest on the capital in the hope of winning a prize. The fact that the largest prize is £1 million and the odds of winning are slim would seem to make a lottery a reasonable analogy albeit you won't lose your initial capital except to inflation.

The analogy doesn't really work (as well as capital retention, there is a reasonably predictable return available on decent-sized holdings so it's not all about tiny chances of the big one, and therefore many do legitimately consider them as a valid alternative to traditional savings, especially given relative current rates), but my question was primarily about your use of how they're apparently 'supposed to be like a lottery', who's asserted this?

I think its a good analogy because with a lottery you also usually have a number of small prizes so with decent-sized holdings of tickets you might have a more predictable return.

I asserted this? Do you have a problem with that?

I don't imagine there's a huge amount of value in disappearing further down this linguistic cul de sac, but if you'd said something like 'I think Premium bonds are like a lottery, not an investment paying you regular income' then that would clearly be a personal opinion (not necessarily invalid), whereas stating 'Premium bonds are supposed to be like a lottery, not an investment paying you regular income' clearly implies that you're referring to something known factually or generally understood by others, but you appear to have no support for that....

Apodemus

eskbanker, I hold premium bonds for the reasons that you outline, of (reasonably) predictable return and capital retention, but the very nature of distributing the returns as "prizes" selected by a random number generator surely align the fund more with the lottery sector than the banking sector?  Wikipedia has this to say:  "The term "premium bond" has been used in the English language since at least the late 18th century,[5] to mean a bond that earns no interest but is eligible for entry into a lottery.[6]"  Now, I don't have a lot of faith in Wikipedia as a source of truth, but it is a useful indicator of commonly held perception and its definition here reinforces the common perception of Premium Bonds as being in some way akin to a lottery.

eskbanker

Apodemus said:

eskbanker, I hold premium bonds for the reasons that you outline, of (reasonably) predictable return and capital retention, but the very nature of distributing the returns as "prizes" selected by a random number generator surely align the fund more with the lottery sector than the banking sector?  Wikipedia has this to say:  "The term "premium bond" has been used in the English language since at least the late 18th century,[5] to mean a bond that earns no interest but is eligible for entry into a lottery.[6]"  Now, I don't have a lot of faith in Wikipedia as a source of truth, but it is a useful indicator of commonly held perception and its definition here reinforces the common perception of Premium Bonds as being in some way akin to a lottery.

Agreed, there are undoubtedly some similarities with lotteries, in the same way that there are some similarities with savings accounts or investments!  That doesn't mean that it's meaningful to try to force-fit them into some arbitrary pigeonhole for the sake of it though....

epm-84

garmeg said:

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

Well yes I'd rather win £1m than a few £25 prizes.  However, if there were 10 prizes of £100,000 instead of one of the £1m prizes then winning one of those prizes would be much better than missing out on the second £1m prize.

tttony

I I think the 2nd million should only be open to people who have at least 5250 bonds

Malthusian

To the headline question: No. The point of Premium Bonds, as with any lottery, is to buy the fantasy of becoming a millionaire (with your foregone interest). Dropping one of the £1 million jackpots makes the fantasy seem less achievable and therefore weakens the raison d'etre of buying Premium Bonds.

It's like saying that Coca-Cola should have less sugar dumped into it to make it healthier. As a statement it's true, but completely misses the point of drinking Coca-Cola.

dcs34

The whole appeal of Premium Bonds over other traditional forms of saving accounts has been the chance (albeit slim) that a £50 stake bought for you by a distant uncle could win you a million quid.

If the complaint is that PBs aren't really earning the 1% rate then I would suggest the answer is to move your money into an account actually paying a guaranteed rate of 1% - there are still a few about. Fiddling around the edges of the prize distribution won't really change the odds.

In fact all your money could be earning 2% with true easy access, i.e. not having to forego a month's return of interest for each withdrawal.