Is NS&I really worth investing with?

Albermarle

RhondaD said:

I see where you are all coming from. I'm almost conflicted in thinking if I just hang on my luck might even out. It's just hard to comprehend a system supposedly random seems never to pick certain bonds.

 15 months does not = never. 

If you hang on long enough, your luck will even out at some point.

eskbanker

RhondaD said:

eskbanker said:

RhondaD said:

I've had £4,000 in premium bonds for a while but I'm starting to think I would get better returns elsewhere. In the last 15 months I've won absolutely nothing. Zilch. Every single month, nothing. I feel I've wasted 15 whole months which even in a savings account would have earned me more. It just seems pointless investing in premium bonds. They don't seem to win anything. I've even asked them if it's usual to not even win a fiver in 15 months and they just gave the usual guff about how every bond has the same chance of winning blah blah blah, but It seems like the 5,000 bonds I bought don't have any chance of winning.

https://www.moneysavingexpert.com/savings/premium-bonds-calculator/ gives an illustration of expected returns with average luck, and, based on the odds applying as at December 2022 draw (i.e. before the rise to a nominal 3%), your expected return would have been £75 over a year, but there's also a far from insignificant 13.5% chance of winning nothing during that time.  There's a 0% chance of winning a fiver as such

They're certainly not for everyone, but anyone buying into premium bonds should acquaint themselves with the basics about likely outcomes before committing....

So effectively I've not even made the expected return if I have made absolutely nothing in 15 months? I think I'm probably better with a guaranteed return from a savings account with the amount I'm investing. 

You haven't achieved the average return, but the nature of premium bonds is a broad range of expected outcomes, from nothing to a lot, so they're inherently unpredictable, which is often seen as part of their appeal rather than being a negative.  The point was that a 13.5% chance of winning nothing (albeit under slightly different circumstances from your own) should illustrate that while you were unlucky, it wasn't by any means a freakish outlier.

RhondaD said:

It's just hard to comprehend a system supposedly random seems never to pick certain bonds.

But only one out of each 24,000 bond numbers is selected in any draw, so lack of prizes for your particular holding doesn't in any way indicate that it's a "supposedly" random system, it's just, er, random - that's how randomness works!

RhondaD

twadds123 said:

been thinking about this and really as someone else said, do you prefer the certainty of returns in a savings account, or prefer an outside chance of winning some money?

Your money is safe in premium bonds also winnings are tax free, the cost to play is essentially the amount that money could have earned you elsewhere.  remembering savings interest can be taxed if you go over certain thresholds depending on your taxation levels.

so assuming no tax on savings.

your £4000 in the highest current easy access account (Zopa 2.86%) would earn you £114.4 in interest in a year.

happy to lock it away for a year?  then highest 1 yr fix is (Atom 4.25%) this would earn you £170 in interest in a year.

got access to first direct regular saver?  drip feeding from zopa to FD at 7% @£300 per month totals £194 in interest in a year

depending on your circumstances those are your costs to have the money in premium bonds for a chance to win.

Thank you. This is particularly helpful. I think I'm more geared towards making use of a savings account instead for the amount I am talking about here. 

DietIrnBru

Would I rely on them as a investment vehicle - no - but then again I'm in no danger of maxing out my ISA allowances or personal savings allowance in a given year. I do a standing order of £25 a month into PBs, this is in contrast to £500 I pay in various regular saver accounts. Its a flutter and gives me a few mins in the day to imagine "what if?" ditto with the £10 I play on the lottery in a month - or the obligatory scratch card I buy before my annual leaves finishes to imagine winning big and not going back lol.

Cus

Unless you have the maximum and you are a additional rate tax payer then it might not be worth it.  If you are the above, I don't know any better more secure tax free place for that sum.

Malthusian

RhondaD said:

I see where you are all coming from. I'm almost conflicted in thinking if I just hang on my luck might even out. 

This is gambler's logic and is called the Monte Carlo fallacy. The chance that you will win nothing in the next 15 months is the same as it was in the previous 15 months.
(Well, not exactly the same, because an increase in the prize fund rate slightly reduces the chance of you winning nothing at all. But close enough.) 

Even if I'd just gained a few pounds interest over 15 months it still will have been more than NS&I.

If you'd buried your money in a hole in the ground or left it in a zero-interest current account and earned exactly nothing, you would have done better than NS&I. Because you wouldn't have lost time ringing them up to vent about not winning a prize, and wouldn't have been annoyed by the gap between your expectation and actual winnings. 

Nobody should invest in Premium Bonds unless they are prepared to win absolutely nothing, and shrug their shoulders and say "some you win some you lose".

25_Years_On

I'm quite happy to take the risk of not getting as much as an easy access saver. I don't have anything like the maximum but I was happy with my luck in 2022 (2.75%) and if there are swings instead of roundabouts so be it.

RedImp_2

Now you can put that money away for a year and get c£180 in interest, 15 months ago probably would have been looking at more like £50 so it’s only recently you could argue you could start to see worthwhile returns 

lindos90

Until recently I felt PBs were worth a punt, and certainly worth 'losing' the tiny amount of interest you would have earned from having the money in a savings account. But as I've seen interest rates rise over the last couple of years (A couple of years ago the base rate was 0.1%, Its now 3.5%) I've had second thoughts.

I have won a bit here and there over the last couple of years, but looking at the current levels of interest I could get by transferring it all to a savings account, I would need significantly more luck with PBs to beat it now.

Theres always the tantalising thought of a big win, but definitely making a decent amount every month in a savings account is becoming a more attractive proposition for me.

If you opened a savings account with one of Martins recommended ones Coventry BS, you could be getting around £130 interest a year. You would need significantly more than average luck with PBs to win more than that with £4000 worth of PBs.

lindos90

davidr1964 said:

I bought £4.5k's worth of PB's in late 2021 and won £5k earlier this year, so you just never know!

Thats fantastic well done!