NS&I to increase the Premium Bond prize rate to 3% – here's all you need to know 13 December 2022 at 4:54PM in Savings & investments 52 replies 7.8K views

eskbanker

Oasis1 said:

Will MSE be updating their PB calculator?

They always have when there have been changes before, so no reason to believe they won't again, but they just need to get their pet "post-doctoral cosmology statistician" to crunch the numbers first....

P1Fanatic

pecunianonolet said:

Is there a good source to read about what premium bonds are and their advantages vs. disadvantages and what group of people are attracted by them and why? Been on their website but not much wiser as to me it seems not much different to gambling with the key point of being able to only win, if you actually win. 

As far as my understanding goes you put money in a pot, there is a likelihood you may win money and what you win is tax free. There are no limits on how much you can put in and 100% of what you put in is guaranteed.

esk covered most of it above. You can set your account to pay winnings back to your bank account or auto re-invest (if you hit the max holding of £50k then you can no longer reinvest). The advantage to re-investing is that bonds are eligible for the very next draw. If you deposit your own money you have to wait a month before those bonds are eligible so effectively you miss a draw.

Black_Cat2

Typical.. just pulled my money out due to crap returns lol.  This black cat has poor luck! 😹

eskbanker

Unusual for an 'official' MSE thread to absorb an existing one started prior to publication of the relevant article, but more sensible than having multiple parallel ones on the go concurrently!

southone

eskbanker said:

Unusual for an 'official' MSE thread to absorb an existing one started prior to publication of the relevant article, but more sensible than having multiple parallel ones on the go concurrently!

Yes very strange the topic of my post was "NS&I raises savings rates and premium bond prize" this topic isn't even relevant and mine was posted five hours earlier maybe the admin would like to comment as to why this just happened

ranciduk

The last time they raised the rate I was worried as they had greatly reduced the £25 prizes - the only prize I have ever won

and I’ve won nothing since 

 Now they are reducing the £25 prizes AGAIN

forget that - I’m out

coyrls

ranciduk said:

The last time they raised the rate I was worried as they had greatly reduced the £25 prizes - the only prize I have ever won

and I’ve won nothing since 

 Now they are reducing the £25 prizes AGAIN

forget that - I’m out

In 2022 there were roughly 5M prizes at £100 or less, in 2023 there will also be roughly 5M prizes at £100 or less and so the odds of you winning a prize at £100 or less haven't changed but the odds of that prize being greater than £25 have improved.

OldScientist

eskbanker said:

Oasis1 said:

Will MSE be updating their PB calculator?

They always have when there have been changes before, so no reason to believe they won't again, but they just need to get their pet "post-doctoral cosmology statistician" to crunch the numbers first....

A sneak preview (courtesy of a rough, but relatively short running, monte carlo solution - the results are based on 10000 random draws and are therefore not quite as accurate as the MSE calculator - likely to be within £25 or so). For a £50k holding for a year:

Median~£1275 (i.e., 2.55%)
Mean~£1479 (i.e., 2.96% - close enough to 3%)
80% of winnings will fall between about £875 and £1950

I too was thinking about withdrawing some PBs and may now change my mind.

Audaxer

Albermarle said:

eskbanker said:

Albermarle said:

southone said:

From

Paul Lewis

NS&I raises savings rates and premium bond prize fund now 3% and many more bigger prizes - therfore fewer £25 prizes. More later but with £50,000 bonds you can expect £1200 a year ie 2.4% tax free. Direct Saver and Income bonds rise from 1.8% to 2.3%

Good news but not sure about where the 2.4% figure comes from ?

Maybe it is because there are fewer £25 prizes ( which constitute the vast majority of the prizes)

So maybe what he means is that with £50K in bonds you are pretty much guaranteed a minimum of 2.4%, then plus an increased  chance of winning a bigger prize, compared to now ?

They've changed the breakdown to pay more larger prizes, so instead of splitting high/medium/low value prizes as 5/5/90% (by value) it'll be 10/10/80%, thereby taking the likely outcome to about 80% of the headline rate instead of 90% as it has been up to now.

It's not quite as simple as that, in that the number of low value prizes moves from 99.63% of the prizes to 99%, or to put a more positive spin on it, the chances of winning a medium/high one (if winning a prize at all) improve from 0.37% of prizes to 1%!

Yes we used to say in posts that when the rate was 1.4% , it was effectively 1.25% with a very small chance of winning a big(ish) price, and an infinitesimal chance of winning a Million.
So now when the rate is 3%, it is effectively 2.4% for the majority, but with a little bit better chance than before of getting a larger prize, although the chance of winning a Million remains very very remote.

Is 2.4% only likely if you have the full £50k in PBs?

mebu60

ranciduk said:

The last time they raised the rate I was worried as they had greatly reduced the £25 prizes - the only prize I have ever won

and I’ve won nothing since 

 Now they are reducing the £25 prizes AGAIN

forget that - I’m out

Not sure that they are reducing the number of £25s and there is more likelihood of winning a prize >£25. 

You don't say the size of your holding. At the new 3% headline you'll need c£1000 to average a win of 1 x £25 a year. You'd need more previously at 2.2% headline and that was only recently increased in October from 1.4% which would require a holding of c£2000 to average 1 x £25 per annum.