Time to dump Premium Bonds?

Keezing

eskbanker said:

Keezing said:

eskbanker said:

boingy said:

Keezing said:

The headline rate for Premium Bonds is 3.7%, but most people will not achieve this due to prize weightings. With average luck you will achieve 3.2% tax free.

And how much will the *median* customer earn? It's significantly less than the average one.

The median average return will be about 2.95%, despite the mean average being the nominal 3.7%, as the top 20% of the prize fund (by value) is paid out from only about 1% of the prizes (by volume), so the expected return should be roughly 80% of the mean.

So even achieving just 80% of the mean, the expected value is still higher than Chip @ 4.21%, which returns 2.3%-2.9% net for higher and additional rate tax payers.

If we consider that we might hold our emergency fund for 30 years, this matters.

So we agree that Premium Bonds are the better option for higher and additional rate tax payers to store their emergency fund versus savings accounts.

'Better' is quite subjective, but yes, the 'average luck' (median) expected return from PBs is currently above the (guaranteed) net return from Chip for higher/additional taxpayers, which I make to be 2.5% or 2.3% by the way.

I factored in the £500 personal allowance for the higher rate tax payer on a balance of £50k.

talexuser

I got to the max in 2018, and the prizes have been  £3875 i.e. 7.75% over 57 months. How that compares to a variable easy access account during the same period taxed at 40% is beyond my working out.

Stargunner

Hopefully, if more of you keep pulling out, it may encourage NS&I to keep increasing their prize rate to try to attract more bond holders. Prize rate increased to 3.7% for the July draw and up to 4.0% from the August draw.

chucknorris

Doctor_Who said:

My year to date return has been 3.25% on a full holding and still 6 months to go........so a big thank you to everyone with below average returns  . I'm sure my luck will soon run out and your luck will improve, we'll find out in a few days.

I was going to say that your returns would obviously be much greater in the lottery than in PB's, but then I realised that you do not have to buy many tickets when you already what know the winning numbers will be, and obviously the billions that you have already won needs to invested somewhere.

Doctor_Who

chucknorris said:

Doctor_Who said:

My year to date return has been 3.25% on a full holding and still 6 months to go........so a big thank you to everyone with below average returns  . I'm sure my luck will soon run out and your luck will improve, we'll find out in a few days.

I was going to say that your returns would obviously be much greater in the lottery than in PB's, but then I realised that you do not have to buy many tickets when you already what know the winning numbers will be, and obviously the billions that you have already won needs to invested somewhere.

Sorry, been out 'walking' K9. Compound interest works miracles when you have a Time Machine! The PBs just add a bit of excitement each month. I'm embarrassed to say that most of the cash is kept under 1000s of mattresses in the TARDIS; anyone got good suggestions where I can save/invest a few £bn?