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

NaughtiusMaximus

dcs34 said:

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.

Agree with your first sentence and for this reason I favour keeping the prize distribution as it is.

Savings rates are much lower than you're suggesting though, the only way at present to achieve a guaranteed 1% is to lock away your money for 3 years and it's been a number of years since I last saw a true easy access savings account with a 2% interest rate (I'm not counting interest earning current accounts or regular savers as they invariably have a relatively low maximum limit on the amount you can save).

Frogletina

NaughtiusMaximus said:

dcs34 said:

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.

Agree with your first sentence and for this reason I favour keeping the prize distribution as it is.

Savings rates are much lower than you're suggesting though, the only way at present to achieve a guaranteed 1% is to lock away your money for 3 years and it's been a number of years since I last saw a true easy access savings account with a 2% interest rate (I'm not counting interest earning current accounts or regular savers as they invariably have a relatively low maximum limit on the amount you can save).

The good thing about regular savers though is to have lots so that each month at least one matures so that all of your money is not tied up for years. There are many of these still at 1% and higher.

However, I have these in addition to Premium bonds 

epm-84

Malthusian said:

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.

Not sure of the relevance.  There's an argument that using sweeteners instead of sugar can make a drink healthier without it tasting less sweet.

Also the original poster's suggestion was 1 x £1m prize instead of 2.  It wasn't all that long ago when Premium Bonds did only offer 1 x £1m prize, despite a larger prize fund than the current prize fund.  So if you want to use a Coca Cola analogy then maybe a better one would be having full sugar Coca Cola but limiting the intake to no more than 1 glass/can per day.

cricidmuslibale

Thank you very much for all your replies so far! Much appreciated! So the overwhelming consensus amongst those who have so far contributed seems to be to keep two £1 million prizes even if either the 1% interest rate is maintained for a long time or reduced further?

[As it happens I would be in favour of two £1 million prizes if/when the interest rate was to return to the recent 1.4% or indeed any higher than it is at present, thus only having one £1 million prize would apply only whilst the interest rate remains at 1% or lower.]

cricidmuslibale

Senseicads said:

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

I sincerely apologise if that's what it appears I'm doing! Couldn't you retire early with a tasty £100,000 instead? I'm definitely not trying to get the number of £100,000 prizes reduced!

cricidmuslibale

2010 said:

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

I very much hope they do this but, if NS&I were to do this again - they may not of course esp. if it would make PBs too attractive to too many savers - it would very likely be an increase from £50k to £60k; when the maximum holding limit has been increased in the past (twice I think in total from the original holding limit of £30k) it has been by £10k each time. As many more people hold Premium Bonds than other NS&I accounts, especially now with the recent huge interest rate cuts, it may well be that any future maximum holding limit increase would be pre-announced by the Chancellor of the Exchequer either in a budget speech or during one of his regular statements. 

dcs34

NaughtiusMaximus said:

dcs34 said:

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.

Agree with your first sentence and for this reason I favour keeping the prize distribution as it is.

Savings rates are much lower than you're suggesting though, the only way at present to achieve a guaranteed 1% is to lock away your money for 3 years and it's been a number of years since I last saw a true easy access savings account with a 2% interest rate (I'm not counting interest earning current accounts or regular savers as they invariably have a relatively low maximum limit on the amount you can save).

Skewed a little bit as I just opened a Newbury easy access account paying 1.1%. Local Building Societies may still offer better rates to savers within local areas.

And yes, the 2% account has a low limit per account. There's an obvious solution to that problem of course 

Malthusian

epm-84 said:

Malthusian said:

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.

Not sure of the relevance.  There's an argument that using sweeteners instead of sugar can make a drink healthier without it tasting less sweet.

A wrong argument as otherwise nobody would use sugar. Either sweeteners aren't as tasty as sugar or Coca-Cola actively wants to kill people. The first is so overwhelmingly more likely that we don't have to bother trying to explain why saccharine isn't as tasty as sugar in biochemical or culinary terms.

Also the original poster's suggestion was 1 x £1m prize instead of 2.  It wasn't all that long ago when Premium Bonds did only offer 1 x £1m prize, despite a larger prize fund than the current prize fund. 

But now they do have 2 x £1m prizes. The logical argument that "it used to be £1 million so the fantasy is just as good as it was back then" is perfectly logical but lotteries aren't supposed to be logical.

People get more upset about 2 x £1m prizes being turned into one than they feel happy about one turning into two.

Announcing that your chances of becoming a millionaire have been slashed in half would significantly weaken the fantasy, and saying "but but but we're only going back to how it used to be" isn't going to restore it.

pip895

My thoughts are that as the chance of winning the big prize is virtually zero then 2 x virtually zero are essentially no different.  So long as they keep the one large prize then the possibility is still there.    I think £50k/person limit is fine to - no need to up that imo.  If the overall interest rate allowed then I would vote for 1 x £2million prizes over 2 x 1 million.   At the current interest rate I would be happier to make sure that the small prizes that allow you to get some return on a largish investment are maintained and go for 1 x 1million prize.