Premium Bonds - 2 brief questions

Jibeddy

Hi All,

Long time lurker, infrequent poster. Firstly, thank you to everyone who posts on this board/forum. It's been a great deal of help in turning my financial situation around over the last few years.

I've had a bunch of regular savers come to an end so it's been a while since I last had to shop around for some savings account, gosh it's bad but it is what it is. With Skipton now reducing their interest rate I was a bit lost with what to do with my savings and I think I'm prepared to 'gamble' on some Premium bonds. I understand that if it were long term I may be better investing, however I should be in a position to purchase my first property in around 12-18 months time so I'm not prepared to take that sort of risk right now.

My 2 questions are:
- Is there an 'optimal' time in the month to purchase the bonds? From what I've read towards the end of the month is better, I just want to sensor check that this is correct. Also, how long does it take between purchasing and me actually owning the bonds? IE If I were to purchase them on the 31st of this month, presumably it would take a a couple of days for this to happen.
- This may sound silly, but I'll just set it all out. I note that the odds of winning a £25 prize are 1 in 34,500. Does it therefore make more sense to invest in factors of 34,500 (11,500 / 17,250 etc.)? Or am I just overthinking things?

anxiousnow

Re the bonds, you're in the prize draw after you've owned the bonds a  whole calendar month, i.e. investment on 31st March would mean you were entered in the May prize draw.
I've no idea about the odds question I'm afraid. 
If you're under 40 and want to buy your first property in 12-18 months, have you considered investing up to £4K per year in a Cash LISA to benefit from the 25% government bonus? Lifetime ISAs: free £33,000 towards your first home or retirement - MSE (moneysavingexpert.com). 

Eco_Miser

It doesn't matter whether you invest on the 1st or 31st of the month, except that if you wait until the 31st you could be earning money in a different account (if you had such an account). Remember that an investment anytime in March first goes into the draw in May.

If you purchase by debit card you can see your bonds immediately, other methods depend on how long it takes to process your payment.

No, the size of the block you buy has no bearing, each bond has one chance in 34,500 of winning in each draw. This does not mean that if you buy 34,500 bonds one of them is certain to win. However you do have an expectation of one winning, which is not materially changed if you have 34,499 or 34,501 bonds.

Jibeddy

anxiousnow said:

Re the bonds, you're in the prize draw after you've owned the bonds a  whole calendar month, i.e. investment on 31st March would mean you were entered in the May prize draw.
I've no idea about the odds question I'm afraid. 
If you're under 40 and want to buy your first property in 12-18 months, have you considered investing up to £4K per year in a Cash LISA to benefit from the 25% government bonus? Lifetime ISAs: free £33,000 towards your first home or retirement - MSE (moneysavingexpert.com). 

Eco_Miser said:

It doesn't matter whether you invest on the 1st or 31st of the month, except that if you wait until the 31st you could be earning money in a different account (if you had such an account). Remember that an investment anytime in March first goes into the draw in May.

If you purchase by debit card you can see your bonds immediately, other methods depend on how long it takes to process your payment.

No, the size of the block you buy has no bearing, each bond has one chance in 34,500 of winning in each draw. This does not mean that if you buy 34,500 bonds one of them is certain to win. However you do have an expectation of one winning, which is not materially changed if you have 34,499 or 34,501 bonds.

Thanks both. Yes I've already got a LISA and have maxed it out for the last 4 years, I'll also be maxing it again in the new tax year.

Yes investing late to try and keep earning interest elsewhere was the thinking behind it and that answers my questions. Thanks again.

becky_rtw

Dont forget to get the prize checker app as you find out before they email if you have won one of the small prizes
Bigger prizes (£5,000 up) get treated differently.

ranciduk

I’m holding off buying anymore as due to record breaking demand for PB’s there is speculation the ‘interest rate’ may be cut - again

i don’t want to waste my time if they absolutely slash the rate like they did with their other accounts last year!

cricidmuslibale

becky_rtw said:

Dont forget to get the prize checker app as you find out before they email if you have won one of the small prizes
Bigger prizes (£5,000 up) get treated differently.

I remember reading somewhere recently - it could have been on the MSE website - that on average a Premium Bond holder with the max. holding of £50,000 is likely to win one large prize (£5,000 or more) every 20 years! Most of us therefore have to be very patient in waiting! I believe it's roughly once every 6 years that a max. holding Premium Bond holder would expect to win a medium sized prize of either £500 or £1000 with £500 being around three times more likely to be won in this case. Therefore if you've saved into Premium Bonds during the last few months and won a prize of £500 or more, even with the max. £50,000 invested, you have had a lot more fortune than average luck!

eskbanker

ranciduk said:

I’m holding off buying anymore as due to record breaking demand for PB’s there is speculation the ‘interest rate’ may be cut - again

i don’t want to waste my time if they absolutely slash the rate like they did with their other accounts last year!

They reduced the PB rate at the same time as slashing the rate on the other accounts, but yes, as discussed at https://forums.moneysavingexpert.com/discussion/6248996/record-2-16-billion-more-saved-in-premium-bonds-in-a-month-mse-news/p1 further reductions may happen at some point.

However, worth noting that the rate changes applying from the December 2020 PB draw were announced on 21 September, giving plenty of notice within which to make alternative arrangements, so unlikely that you'd be rushed into anything if they follow the same pattern....

https://nsandi-corporate.com/news-research/news/nsi-reduce-interest-rates-24-november-2020

eskbanker

cricidmuslibale said:

I remember reading somewhere recently - it could have been on the MSE website - that on average a Premium Bond holder with the max. holding of £50,000 is likely to win one large prize (£5,000 or more) every 20 years! Most of us therefore have to be very patient in waiting! I believe it's roughly once every 6 years that a max. holding Premium Bond holder would expect to win a medium sized prize of either £500 or £1000 with £500 being around three times more likely to be won in this case. Therefore if you've saved into Premium Bonds during the last few months and won a prize of £500 or more, even with the max. £50,000 invested, you have had a lot more fortune than average luck!

By my reckoning (using the March draw prize breakdown), a maximum holding should win a £50/100 prize every three years, £500/1000 every 25 years and £5000+ every thousand years!

cricidmuslibale

eskbanker said:

cricidmuslibale said:

I remember reading somewhere recently - it could have been on the MSE website - that on average a Premium Bond holder with the max. holding of £50,000 is likely to win one large prize (£5,000 or more) every 20 years! Most of us therefore have to be very patient in waiting! I believe it's roughly once every 6 years that a max. holding Premium Bond holder would expect to win a medium sized prize of either £500 or £1000 with £500 being around three times more likely to be won in this case. Therefore if you've saved into Premium Bonds during the last few months and won a prize of £500 or more, even with the max. £50,000 invested, you have had a lot more fortune than average luck!

By my reckoning (using the March draw prize breakdown), a maximum holding should win a £50/100 prize every three years, £500/1000 every 25 years and £5000+ every thousand years!

In that case I've clearly misremembered what I read! I should add the probable outcomes were under the previous prize-winning odds of 24500 to 1 though so they will have reduced no doubt with the current odds of 34500 to 1. The once every 20 years I referred to above would have been about how often a maximum holding could have expected to win either a £500 or a £1000 prize under the previous odds, £500 being 3 times more likely to be won than £1000 in this case.

squirrelchops2

I had the maximum amount of £50k for about 3 years - and never won more than £75 in one month. I wouldn't win every month either! I now only have £15k in there and this month won £100 - I wonder if that is due to people having withdrawn money due to poor rates so I had more chance of winning?  OH has £50k in there and most he has ever won in 1 month in the last 3 years is £500.