Premium bonds, a case now for closing them?

TUVOK

With inflation thought to rise to 13% +, is there now a case to slowly re-invest into fixed rate/notice accounts?
N.S & I are always slow in readjusting their interest rates, so not much hope of keeping up with inflation.

Only proviso being tax sheltering and the ever lasting hope of a big win! 

quirkydeptless

Reduced mine down to £25 so I've still got the chance of winning a £million

eskbanker

As an easy access product, premium bonds have never competed with fixed rate or notice accounts, so that comparison wouldn't ever really be relevant, and none of the above has any chance of staying anywhere near inflation at this sort of level....

ColdIron

I had PBs but swapped them out for a 3 year fix at 4% in 2012, I can't remember the PB rate at the time but it was quite a bit less. I moved back into them mid 2020s as they were competitive then, but I think the time is coming to move again. The only thing staying my hand so far is the tax free element that is useful to me

zxspeccy

ColdIron said:

I had PBs but swapped them out for a 3 year fix at 4% in 2012, I can't remember the PB rate at the time but it was quite a bit less. I moved back into them mid 2020s as they were competitive then, but I think the time is coming to move again. The only thing staying my hand so far is the tax free element that is useful to me

I would agree, it would be nice to see NS&I increasing the monthly prize pot to something more competitve but I am not convinced they will do this. 
I hold the maximum allowance in Premium Bonds and will probably keep them until the end of the year, and if the prize pot is more competetive then I will review further. Also I have had below average luck so far this year with the draws so I see where I stand at the end of the year.
The tax free element is important to me as I would exceed my PSA, so would therefore need to look at savings products paying a sufficient premium over the 1.40% offered by NS&I.

Exodi

zxspeccy said:
I hold the maximum allowance in Premium Bonds and will probably keep them until the end of the year, and if the prize pot is more competetive then I will review further. Also I have had below average luck so far this year with the draws so I see where I stand at the end of the year.

Do you mean below average luck based on the  mean 1.4% AER advertised on NS&I because you will have to appreciate that virtually everyone, except a tiny minority winning the high value prizes, will have 'below average luck'.

As MSE puts it:

Why the Premium Bond prize rate isn't what you'll win

To show you why using the 'mean' average isn't a good description of what most people will win, let me use an extreme example…

Imagine I sold a million people a £1 lottery ticket, and then paid just one winner a million pounds.

I could argue, mathematically, that the average (mean) payout was £1, so on average everyone got their money back. This, of course, is bonkers.

Almost everyone wins nothing – which is the median average – as if you lined them all up and asked, the midway person would've won nowt.

In this lottery example, technically the 999,999 losers would have had 'below average luck'.

I think the median rate on £50k would work out to about 1.3% AER, meaning with average luck you'd expect approx £650 a year instead of £700.

Apologies, you may already be aware of all this - but may be useful for other posters.

Oasis1

TUVOK said:

Only proviso being tax sheltering and the ever lasting hope of a big win! 

Those are exactly the benefits of PBs over easy access saving accounts. It's never the prize rate, which as Exodi points out above, isn't great even if you have average luck. You've got to work out if the tax-free prizes and hope of a big win brings you sufficient joy over guaranteed returns.

Exodi

Also as a fun little titbit of information to depress people just before the weekend.

If you hold the maximum £50k in premium bonds, your odds of winning the million pound prize every month are 1 in 1,181,644 (or about once every 96,073 years).

Happy weekend all

EDIT: clarity

CompulsiveSaver

eskbanker said:

As an easy access product, premium bonds have never competed with fixed rate or notice accounts, so that comparison wouldn't ever really be relevant, and none of the above has any chance of staying anywhere near inflation at this sort of level....

If you compare it to the Shawbrook Easy Access Account @ 1.75% that means that compared to the Premium bond (tax free) prize pool of 1.4%, that means as long as you are a basic rate tax payer, it would be neutral even if you had used all of your £1000 allowance.

And after a few months of not winning, I am thinking of leaving NS&I to their slow ponderous ways.

Norman_Castle

Exodi said:

If you hold the maximum £50k in premium bonds, your odds of winning are 1 in 96,073 (just over once every 8000 years) - which means even if you invested £50k in premium bonds at the dawn of human civilisation and passed them down through the generations, you probably still wouldn't have won yet.

Presumably you mean the main prize.

Exodi

Norman_Castle said:

Exodi said:

If you hold the maximum £50k in premium bonds, your odds of winning are 1 in 96,073 (just over once every 8000 years) - which means even if you invested £50k in premium bonds at the dawn of human civilisation and passed them down through the generations, you probably still wouldn't have won yet.

Presumably you mean the main prize.

Yes sorry, the £1M prize, edit for clarity