NS&I raises interest rates

ColdIron

Variable rate products rise from 16 August - see below - and from September draw premium bonds odds are improved from 22,000:1 to 21,000:1 and prize fund boosted from 4% to 4.65%.

https://www.gbnews.com/money/nsandi-interest-rate-rise-premium-bonds

Sg28

A nice premium bonds increase there.

LoopySnooker

Looks like we’ll be going back in…..

ColdIron

From Paul Lewis (MoneyBox)

Premium Bonds: new odds and interest rate and changed prize structure from Sept draw mean someone with max £50,000 holding can expect 1x£50 plus 1x£100 prize each month and five £25 prizes per year = 3.72% tax free = 4.65% (basic) or 6.2% (higher). 1.16m people have the max.

Albermarle

As discussed many times before, the Million Pound prizes distort what you can expect to get in reality, which is about 4.3/4.4 % ? Non taxable of course.
Best paying easy access ISA is 4.4%, so the PB's are now pretty much on the money for tax free easy access savings.
I guess after lecturing the banks about passing on interest rate increases, they have had to do the same !

ColdIron

Finally up on NS&I

https://nsandi-corporate.com/news-research/news/millions-nsi-customers-benefit-interest-rate-increases-across-variable-products

eskbanker

Albermarle said:

As discussed many times before, the Million Pound prizes distort what you can expect to get in reality, which is about 4.3/4.4 % ? Non taxable of course.
Best paying easy access ISA is 4.4%, so the PB's are now pretty much on the money for tax free easy access savings.

Based on the prize distribution, under which the top 20% of the prize fund is delivered by just 1.36% of the prizes, the median outcome is still likely to be closer to 80% of the headline rate, so the 'average luck' return should be expected to be more like about 3.7% than the figures you suggest - obviously better than before, but not as competitive against similar products as you've implied.

Albermarle

eskbanker said:

Albermarle said:

As discussed many times before, the Million Pound prizes distort what you can expect to get in reality, which is about 4.3/4.4 % ? Non taxable of course.
Best paying easy access ISA is 4.4%, so the PB's are now pretty much on the money for tax free easy access savings.

Based on the prize distribution, under which the top 20% of the prize fund is delivered by just 1.36% of the prizes, the median outcome is still likely to be closer to 80% of the headline rate, so the 'average luck' return should be expected to be more like about 3.7% than the figures you suggest - obviously better than before, but not as competitive against similar products as you've implied.

OK I was hoping someone with a better grasp of maths/probabilities would come along 

So 3.7% and a slightly better chance of winning a bigger prize than before ( as there are more of them apart from the two Million prizes) . Would that be a fair comment? 

ChilliBob

So if you factor in 20% tax, 5.56% interest rate is required, if 40% tax 7.75%..

Thats just using a narrowing in calculation method, I can't for the life of me remember how to do if properly! 

eskbanker

Albermarle said:

eskbanker said:

Albermarle said:

As discussed many times before, the Million Pound prizes distort what you can expect to get in reality, which is about 4.3/4.4 % ? Non taxable of course.
Best paying easy access ISA is 4.4%, so the PB's are now pretty much on the money for tax free easy access savings.

Based on the prize distribution, under which the top 20% of the prize fund is delivered by just 1.36% of the prizes, the median outcome is still likely to be closer to 80% of the headline rate, so the 'average luck' return should be expected to be more like about 3.7% than the figures you suggest - obviously better than before, but not as competitive against similar products as you've implied.

OK I was hoping someone with a better grasp of maths/probabilities would come along 

So 3.7% and a slightly better chance of winning a bigger prize than before ( as there are more of them apart from the two Million prizes) . Would that be a fair comment? 

Effectively, yes - the chances of winning any prize have improved by virtue of the move from 22K:1 to 21K:1, and the >£100 ones now make up 1.36% instead of 1.225% of the prizes by volume, but they still represent 20% of the prize fund by value, as before.

friolento

3.7% would still equate to 6.16% taxable for a higher rate taxpayer. So PBs remain attractive for them once they have exhausted their PSA and their ISA allowance. Although there's no guarantee they'd get 3.7%.....