What do you think of Premium Bonds?

Albermarle

I-LOV-MONEY said:

patpalloon said:

Slight tangent, but what do people think of Premium Bonds? I like em and still dream of a decent payout. But on the whole they pay less than savings, particularly as rates have gone up. And I believe you have to have a NS&I savings account with min of £500 which pays poor interest - but correct me if I am wrong.

I have PB but don't have a NS&I savings account.

PB are like the lottery.  You 'invest' in the hope that it maybe your 'turn' to win the big prize !!

They are not like the lottery, To start with you can always get your original investment back. However this means the odds of winning a big prize are less.

The reality is that if you hold the full £50K for a couple of years, you will almost certainly get a return around 2%. Plus a very very small chance of winning a prize over £5000. On average you would win a Million every 30,000 years or something like that .

PawelK

I am hoping for a decent win in December after last three months of poor returns. I'll then check my average rate of return from 2022 and if it's not above 2%, will most likely withdraw big part of it and out in cash ISA before end of March. 

talexuser

They are worth it if ISA is maxed every year, pension is maxed every year, and you don't want to pay 40% tax on any further savings interest.

strawb_shortcake

I like them, it adds a bit of excitement once a month. 

I don't pay tax on my interest, but having only recently stopped claiming child tax credits it made my life easier to keep my interest below £300pa until that's all closed out. 

Also, I've won £625 in the last two months on full holding so that's helping keeping me sweet 

Malthusian

PawelK said:

I am hoping for a decent win in December after last three months of poor returns. I'll then check my average rate of return from 2022 and if it's not above 2%, will most likely withdraw big part of it and out in cash ISA before end of March. 

This is called the Monte Carlo fallacy. And they say that Premium Bonds aren't like gambling... ;-)
If you get a nice big win in December your chances of getting a poor return for the next year are exactly the same as if you don't win a single prize for the rest of 2022. No matter what your Premium Bonds pay out in the next couple of months, an easy access cash ISA (up to 2.75%) will still beat Premium Bonds on average.
Using gambler's logic, it would make just as much sense to move money from your Premium Bonds to a cash ISA if you have a big win in the next couple of months, and call it "quitting while you're ahead". 

Millyonare

If I told you I'd just gone down the bookies at lunch and placed a £50,000 bet on Elvis riding Shergar into a chip shop in Scunthorpe on Xmas Day, you'd think I'd lost the plot... But that's roughly the same odds you get as winning "the big one" on Premium Bonds.

eskbanker

Jacob_Jones said:
With Premium Bonds you need to see it from the other side.

ie What benefit is the UK government getting from this deal? 
Why are they offering you the opportunity to win these cash amounts? What's in it for them? 
They won't be doing it for your benefit. They will have their own agenda and incentives. 

Nobody needs to see it from the other side, but there's nothing stopping people from doing so if they choose!

There's no secret about how PBs raise funds for the Treasury, and the use of a prize fund (currently lower than the returns they'd need to offer for the likes of gilts) instead of paying a simple interest rate isn't inherently suspicious, and in fact is part of the appeal for most who choose to buy them.

Swipe

Fine by me if it's less to get taxed on when all other savings vehicles are maxed out

oldfella

my logic is to get 1 PB. That gives me the possibility of winning a lot, although a very very very small chance. Buying a lot of PB increases your chances, but the percentages are still massively against you. So put the rest of your savings where they earn more interest than the likely average return on PBs.

Swipe

oldfella said:

my logic is to get 1 PB. That gives me the possibility of winning a lot, although a very very very small chance. Buying a lot of PB increases your chances, but the percentages are still massively against you. So put the rest of your savings where they earn more interest than the likely average return on PBs.

Good luck with that. I held £100 of premium bonds for over 25 years and didn't win a single prize