Is it worth renewing Premium Bonds periodically

EthicsGradient

I ran a simulation to see the spread of prizes you might expect, and I think that, even after 5 years, the width of quite likely returns might surprise many people - the program ran 50,000 times, and the y axis is how many times a particular return happened:

eskbanker

jabu94 said:

I've held the maximum amount of Premium Bonds for a number of years. In the last few months, I've noticed what amounts to a considerable reduction in my returns. I was just wondering if anyone else has had a similar experience and if it would improve the results to "refresh" the bonds - that is to cash in and then rebuy a portion of the bonds in order to "update" the bond numbers on a regular basis, to improve returns. Basically, what I am asking is whether there is any advantage to owning newer bonds?

It's a recurring theme, as this question comes up fairly regularly, but it's a myth that changing bonds improves the chances of winning.

NS&I clarify this themselves:

https://nsandi-corporate.com/news-research/news/top-five-premium-bonds-myths-busted

and for those who perceive him as a more credible source, Martin Lewis apparently reiterated the same message on a recent podcast:

Mr Lewis debunked "many myths" about premium bonds, emphasizing: "I often get asked, I've had my premium bonds a long time but haven't won anything, will I be better off buying new bonds because they seem to win more? Complete urban myth.

"Every bond has the same chance of winning in the prize draw as every other bond. The reason more new bonds win is because there are more new bonds. When people were buying these bonds in the 1960s and 1970s, they were buying £1, £10, £20 worth. Now people are buying £500, £1,000, £10,000 worth."

He continued, explaining the influx of new bonds: "So there are just simply more new bonds, so more new bonds win more often."

Addressing regional disparities in winnings, he cited economic factors rather than luck: "That tends to just be a fiction as people in those areas have more premium bonds."

as reported via various Reach titles (I haven't validated whether those words were actually used, or if so, when).

Once upon a time, over 19 years ago, a poster on here posited "i have a theory that newer bonds win more prizes" and the resultant thread is still going strong, over a thousand pages later!

https://forums.moneysavingexpert.com/discussion/81778/premium-bond-winner/p1

boingy

I think the problem is that the very oldest bonds are right at the back of the giant filing cabinet so there is not always enough time to retrieve those bits of paper for a draw, especially in months with fewer than 31 days. At least that's what the bloke in the pub told me. Stands to reason, dunnit?

kempiejon

I am all in favour of people swapping for new bonds every few months if they think that might increase their returns. Every month I am in the draw and they are switching increases my odds. Assuming NS&I are not fingering the scales (I think they talk very loudly about it being random) and if that is how randomness, odds etc work

eskbanker

kempiejon said:

I am all in favour of people swapping for new bonds every few months if they think that might increase their returns. Every month I am in the draw and they are switching increases my odds. Assuming NS&I are not fingering the scales (I think they talk very loudly about it being random) and if that is how randomness, odds etc work

No, it's not how odds work, you have the same probability of winning a prize (1 in 22,000 per bond) regardless of how many bonds are in each draw - see myth 5 in the NS&I article linked above.

1spiral

Actually I think there is a very good argument for older bonds having a better chance of winning.

The reason being that on rare occasions ineligible bonds have their winnings returned to the prize pot and are redistributed to a number that was in that draw. If you cash in and re-buy, you lose that potential prize option.

Section62

1spiral said:

Actually I think there is a very good argument for older bonds having a better chance of winning.

The reason being that on rare occasions ineligible bonds have their winnings returned to the prize pot and are redistributed to a number that was in that draw. If you cash in and re-buy, you lose that potential prize option.

I'm not sure NS&I publish a figure for the number of ineligible prize-winning bonds per draw, but as the process of dealing with them is a manual one done by a "small, specialised group of trained staff" we can probably assume the number is very small in comparison to the total number of prizes.

AIUI, if the bond was eligible in a given draw then any prize due to it would be paid, even if subsequently cashed in.

And unless the individual bond has already won a prize in that draw the most that can be won is £25... so overall there is likely to be a very remote chance of possibly winning £25.

If I needed to cash in some bonds I wouldn't let that stop me.  As has been said already, the primary reason for not cashing in and rebuying (in the same month) is being out of the draw for a month with no actual benefit in terms of increasing the odds of winning.

Alexland

1spiral said:

Actually I think there is a very good argument for older bonds having a better chance of winning.

The reason being that on rare occasions ineligible bonds have their winnings returned to the prize pot and are redistributed to a number that was in that draw. If you cash in and re-buy, you lose that potential prize option.

That's really interesting but is there evidence that older bonds are more likely to be ineligible than newer ones? For example a quick google search returned a FOS decision where the ineligible ones were actually the newest ones recently purchased because the person opened a second account and in total exceeded their £50k allowance across both accounts. Then there was a big argument about returning the winnings on the newest bonds.

Section62

Alexland said:

1spiral said:

Actually I think there is a very good argument for older bonds having a better chance of winning.

The reason being that on rare occasions ineligible bonds have their winnings returned to the prize pot and are redistributed to a number that was in that draw. If you cash in and re-buy, you lose that potential prize option.

That's really interesting but is there evidence that older bonds are more likely to be ineligible than newer ones? For example a quick google search returned a FOS decision where the ineligible ones were actually the newest ones recently purchased because the person opened a second account and in total exceeded their £50k allowance across both accounts. Then there was a big argument about returning the winnings on the newest bonds.

I think 1spiral was making a different argument - that older bonds might be eligible for reallocated prizes, and therefore the older the bond the more draws it had been eligible for in which a belated reallocation may still be due.  In other words, an old bond is eligible for not just the current draw, but might benefit from retrospective wins from historic draws as well.

For the reasons I gave I don't think this matters - if the bond was eligible at the time then the prize would still be paid, even if the bond is no longer eligible. Furthermore the reallocation isn't really a new draw, just an adjustment of how the prizes were allocated and one additional £25 winning bond.  If cashing in a bond meant the holder was not eligible for any retrospective adjustment then it might make sense not to cash in any individual bonds that had previously won a prize (especially those winning one of the larger amounts so you know how close you were to the threshold) but the odds of a 'virgin' bond becoming a winning bond (and then only £25 at best) are so small I don't think many people would consider it a factor worth taking into account.

There is a FOS case involving "Mr R" which makes interesting reading, but the Ombudsman didn't seem to have a problem with the NS&I T&C's being clear that bonds exceeding the (£50,000) limit wouldn't be eligible for prizes, and it is clearly those purchased after the limit was reached that were ineligible.  The interesting bit (for MSEers) is perhaps the view that the applicant not providing full details on the application makes it their fault (in effect), even if the service provider could (and perhaps should) check the details and work out for themselves that the application wasn't valid.

1spiral

Section62 said:

Alexland said:

1spiral said:

Actually I think there is a very good argument for older bonds having a better chance of winning.

The reason being that on rare occasions ineligible bonds have their winnings returned to the prize pot and are redistributed to a number that was in that draw. If you cash in and re-buy, you lose that potential prize option.

That's really interesting but is there evidence that older bonds are more likely to be ineligible than newer ones? For example a quick google search returned a FOS decision where the ineligible ones were actually the newest ones recently purchased because the person opened a second account and in total exceeded their £50k allowance across both accounts. Then there was a big argument about returning the winnings on the newest bonds.

I think 1spiral was making a different argument - that older bonds might be eligible for reallocated prizes, and therefore the older the bond the more draws it had been eligible for in which a belated reallocation may still be due.  In other words, an old bond is eligible for not just the current draw, but might benefit from retrospective wins from historic draws as well.

That was exactly my point but I'm interested by the point you make re it only being £25 that can be won.

What I think you're saying is that in reallocating the prizes, it just shunts everyone below it up by one. So if the ineligible prize was one of the £1m prizes, then one of the 100K prizes would be bumped up to £1m leaving one of the 50K prizes to be bumped up to 100K and so on until at the bottom someone that won nothing would get £25.

I have certainly seen posts of people that have received adhoc wins for draws several months/years after the original draw but can't recall if they were always £25.