Premium Bond Winner ?

Bravepants

justwantedtosay said:

eskbanker said:

Primrose said:

i for one would welcome more prizes around he £500 mark.  The chances of winning a million pounds are so remote as to be off the radar whereas winning £500 would still be a useful sum to most people.

But subdividing a million quid into two thousand more £500 prizes would still make no meaningful difference to the total number of prizes, i.e. that extra 1,999 prizes would need to be seen in the context of the six million prizes paid out monthly, a point made regularly over the years on here!

https://forums.moneysavingexpert.com/discussion/comment/77468043/#Comment_77468043 

But most of those six million prizes are pointless £25 and £50 wins and the original suggestion was to get rid of them and have many more prizes of £500 and £1,000, not just 2,000, so hundreds of thousands more people won a prize that would actually mean something to most of them.

People with small holdings would probably still win nothing, people with large holdings would still win about the same over a year or two, those in the middle would be more likely to win something a bit more significant.

Hey, for £25 you can get 3 small plates and four pints from a 'Spoons! Hardly pointless! 

justwantedtosay

subjecttocontract said:

I think it's fine as it is.
I'm a great believer in finding something that works and sticking with it.
My other half often finds something that works perfectly and wants to try something new. Some are never satisfied.
Premium bonds are a great success for Government funding, the holders, the winners and anyone that wants to put their money somewhere free from tax. I wish they would stop trying to make it 'better' it doesn't need it.

It's changed enormously over the years. The jackpot was £1,000 (worth £22k now), you could only have 500 bonds, the odds were 9,600 to 1 - a far cry from the 34,500 to 1 they were a couple of years ago - and you could buy a single £1 bond. 

The only thing that's still the same is that the lowest value prize was £25, which would be worth well over £500 now. I really don't see the point of the £25 prize now, and probably not the £50 either - I'm not too sure of the £100 either. Getting rid of them, and the £1m jackpots, would actually make it more like the original, not less and it would mean that there could be around 6,000,000 more £500 prizes a year and many extra £1k to £50k ones. It's so biased towards low value prizes because no-one's allowed to lose nowadays that it's like a savings account for most holders - a small regular income, just with a very, very small chance of winning something that would make a difference.

eskbanker

justwantedtosay said:

eskbanker said:

Primrose said:

i for one would welcome more prizes around he £500 mark.  The chances of winning a million pounds are so remote as to be off the radar whereas winning £500 would still be a useful sum to most people.

But subdividing a million quid into two thousand more £500 prizes would still make no meaningful difference to the total number of prizes, i.e. that extra 1,999 prizes would need to be seen in the context of the six million prizes paid out monthly, a point made regularly over the years on here!

https://forums.moneysavingexpert.com/discussion/comment/77468043/#Comment_77468043 

But most of those six million prizes are pointless £25 and £50 wins and the original suggestion was to get rid of them and have many more prizes of £500 and £1,000, not just 2,000, so hundreds of thousands more people won a prize that would actually mean something to most of them.

People with small holdings would probably still win nothing, people with large holdings would still win about the same over a year or two, those in the middle would be more likely to win something a bit more significant.

This is from a few years ago but still indicates how little chance anyone with just a few bonds has of winning anything, "Nearly three-quarters of Premium Bond holders have failed to win a prize in 14 years despite saving up to £80billion in their accounts." (Also, "43% of all Premium Bonds are held by just 4.3% of savers"). Imagine waiting 14 years, seeing you've finally won and then finding it's £25. In fact it's even worse than that as the 14 years only comes from that being when records started being collected.

My post was specifically in response to the suggestion of creating more £500 by removing one of the £1m ones, but there are any number of ways of carving things up - the fundamental issue remains that any such tinkering would be largely insignificant, assuming an unchanged headline prize rate, unless there was a material change applied to the chances of any individual bond winning in any month, in order to support a higher average prize value, i.e. doubling the average prize value would mean halving the odds of winning anything.

If you're suggesting that tweaking the fund to focus more on the mid-range prizes would improve matters for mid-range holders, while leaving returns much the same for larger holders, the only conclusion is that this would be at the expense of smaller holders - perhaps that'll seem fairer to you but it's not difficult to imagine the opposite view, i.e. for any change that people dream up, there will always be winners and losers relative to the previous mechanism.

Primrose said:

Yes, but it would bring real happiness and perhaps genuine financial relief to those winners and in these difficult times that surely would be worth doing for that reason alone.

Not really - anyone for whom £500 would bring genuine financial relief really ought not to be buying premium bonds with their scarce resources!  Granted, there will be some prize-winners with very small holdings, with correspondingly negligible chances of winning anything, but the average holding is currently about £6K....

ljayljay

justwantedtosay said:

Kim_13 said:

We don’t know what people’s circumstances are and a £25 win might mean they don’t have to skip meals this week. 

Someone with 500 bonds 'should' currently expect to win £25 once in 42 years so it wouldn't be wise to rely on it to pay for their meal. And if they were unable to feed themselves surely they would have cashed in their premium bonds already.

I don't think that can be correct. Just done a quick check on the MSE probability calculator & it gave me this..
 
With average luck, you would expect to win roughly £75 over 5 years if you have £500 of Premium Bonds. Actually I was surprised it was that high but your calculation is clearly a massive under estimate.

justwantedtosay

eskbanker said:
 [ 1 ] My post was specifically in response to the suggestion of creating more £500 by removing one of the £1m ones
[ 2 ] the only conclusion is that this would be at the expense of smaller holders - perhaps that'll seem fairer to you 

1. That's not how I read Primrose's comment.

2. I don't think it would significantly lessen their winnings as they are so low already and if they did win then at least it would something worth having.

justwantedtosay

ljayljay said:

justwantedtosay said:

Kim_13 said:

We don’t know what people’s circumstances are and a £25 win might mean they don’t have to skip meals this week. 

Someone with 500 bonds 'should' currently expect to win £25 once in 42 years so it wouldn't be wise to rely on it to pay for their meal. And if they were unable to feed themselves surely they would have cashed in their premium bonds already.

I don't think that can be correct. Just done a quick check on the MSE probability calculator & it gave me this..
 
With average luck, you would expect to win roughly £75 over 5 years if you have £500 of Premium Bonds. Actually I was surprised it was that high but your calculation is clearly a massive under estimate.

You're right. I don't know where I got that figure. Working it out for myself I reckon it's one £25 win every 8.5 years. That 42 year figure looks like the chance of winning £25 with 100 bonds, not 500.

eskbanker

justwantedtosay said:

eskbanker said:
 [ 1 ] My post was specifically in response to the suggestion of creating more £500 by removing one of the £1m ones
[ 2 ] the only conclusion is that this would be at the expense of smaller holders - perhaps that'll seem fairer to you 

1. That's not how I read Primrose's comment.

2. I don't think it would significantly lessen their winnings as they are so low already and if they did win then at least it would something worth having.

Perhaps I was unduly influenced by the previous references over the years to splitting up the second £1m, but the point remains that arbitrarily reallocating the prize fund won't change the mean but can change the median return (which would obviously be expected to converge to the mean over time).

Is it really better to win, say, £500 every five years rather than, say, four £25s every year though?

Reading back a few pages, I notice that you saw some sort of NS&I survey proposing (?) a provisional change of prize distribution, but can't reconcile it with the actual October figures - however, without actually rekeying the numbers into a spreadsheet, it appears at first glance to be retaining the existing 10/10/80% split of high, medium and low prize pots, so doesn't seem to be a particularly significant or radical suggestion, just a routine tweak of the type they've made many times before when changing headline rates and/or odds of a bond winning?

justwantedtosay

eskbanker said:

justwantedtosay said:

eskbanker said:
 [ 1 ] My post was specifically in response to the suggestion of creating more £500 by removing one of the £1m ones
[ 2 ] the only conclusion is that this would be at the expense of smaller holders - perhaps that'll seem fairer to you 

1. That's not how I read Primrose's comment.

2. I don't think it would significantly lessen their winnings as they are so low already and if they did win then at least it would something worth having.

Perhaps I was unduly influenced by the previous references over the years to splitting up the second £1m, but the point remains that arbitrarily reallocating the prize fund won't change the mean but can change the median return (which would obviously be expected to converge to the mean over time).

Is it really better to win, say, £500 every five years rather than, say, four £25s every year though?

Reading back a few pages, I notice that you saw some sort of NS&I survey proposing (?) a provisional change of prize distribution, but can't reconcile it with the actual October figures - however, without actually rekeying the numbers into a spreadsheet, it appears at first glance to be retaining the existing 10/10/80% split of high, medium and low prize pots, so doesn't seem to be a particularly significant or radical suggestion, just a routine tweak of the type they've made many times before when changing headline rates and/or odds of a bond winning?

Personally I'd sooner have the £500 every so often than £25 more regularly. There'd still be - if they were kept and I'm not sure they should be - £50 and £100 wins in between. Also, you might get lucky and win £500 twice in that time, while winning one extra £25 wouldn't be nearly so pleasing. 

As I wrote, the original lowest prize would now be worth over £500 so the idea was to give prizes that were actually worth winning. Wasn't £50 the lowest prize until a few years ago? It seems odd that it's still £25 when £25 is worth so much less now. How low could they go? A 50p prize so people with few bonds wouldn't miss out? It ends up just being a savings account. 

I wonder how much it costs to send a low value cheque; there's the cheque, postage, the envelope and all the paperwork that comes with it and presumably some cost in handling the money? They post more than half a million each month.It must add up. Or even sending all those millions of electronic payments - does that cost anything? Would the money be better spent on more prizes?

The table from the survey was, I think, just showing what the rates are expected to be in December after another drop in the rate, not the effect of any major changes in distribution. It did ask whether we'd prefer 1, 2 or 3 £1m prizes, how much we appreciate low value prizes, and wanted reactions to changing the odds or tweaking the distribution a bit, presumably with an eye to changing things next year. They wouldn't be asking our opinions of the December draw as it would be too late to change it now.

If there'd been a space for comments I'd have suggested scrapping the £1m prizes and having one or two £2 or £5m prize at Christmas for bonds that have been held for the full year. The £1m prize is worth less than half what it was when it was introduced and, as we all should know, it wouldn't be missed as we ain't ever going to win it. Zero chance of winning £5m might be more appealing to some than zero chance of winning £1m and it might encourage people to keep their money 'invested' as the rate continues to fall, as well as saving costs.(I know it's not quite zero, but those hanging on to their single bond christening present should hope for one jackpot before the solar system doubles its age, but it certainly wouldn't be guaranteed.)

eskbanker

justwantedtosay said:

eskbanker said:

justwantedtosay said:

eskbanker said:
 [ 1 ] My post was specifically in response to the suggestion of creating more £500 by removing one of the £1m ones
[ 2 ] the only conclusion is that this would be at the expense of smaller holders - perhaps that'll seem fairer to you 

1. That's not how I read Primrose's comment.

2. I don't think it would significantly lessen their winnings as they are so low already and if they did win then at least it would something worth having.

Perhaps I was unduly influenced by the previous references over the years to splitting up the second £1m, but the point remains that arbitrarily reallocating the prize fund won't change the mean but can change the median return (which would obviously be expected to converge to the mean over time).

Is it really better to win, say, £500 every five years rather than, say, four £25s every year though?

Reading back a few pages, I notice that you saw some sort of NS&I survey proposing (?) a provisional change of prize distribution, but can't reconcile it with the actual October figures - however, without actually rekeying the numbers into a spreadsheet, it appears at first glance to be retaining the existing 10/10/80% split of high, medium and low prize pots, so doesn't seem to be a particularly significant or radical suggestion, just a routine tweak of the type they've made many times before when changing headline rates and/or odds of a bond winning?

Personally I'd sooner have the £500 every so often than £25 more regularly. There'd still be - if they were kept and I'm not sure they should be - £50 and £100 wins in between. Also, you might get lucky and win £500 twice in that time, while winning one extra £25 wouldn't be nearly so pleasing. 

As I wrote, the original lowest prize would now be worth over £500 so the idea was to give prizes that were actually worth winning. Wasn't £50 the lowest prize until a few years ago? It seems odd that it's still £25 when £25 is worth so much less now. How low could they go? A 50p prize so people with few bonds wouldn't miss out? It ends up just being a savings account. 

I wonder how much it costs to send a low value cheque; there's the cheque, postage, the envelope and all the paperwork that comes with it and presumably some cost in handling the money? They post more than half a million each month.It must add up. Or even sending all those millions of electronic payments - does that cost anything? Would the money be better spent on more prizes?

The table from the survey was, I think, just showing what the rates are expected to be in December after another drop in the rate, not the effect of any major changes in distribution. It did ask whether we'd prefer 1, 2 or 3 £1m prizes, how much we appreciate low value prizes, and wanted reactions to changing the odds or tweaking the distribution a bit, presumably with an eye to changing things next year. They wouldn't be asking our opinions of the December draw as it would be too late to change it now.

If there'd been a space for comments I'd have suggested scrapping the £1m prizes and having one or two £2 or £5m prize at Christmas for bonds that have been held for the full year. The £1m prize is worth less than half what it was when it was introduced and, as we all should know, it wouldn't be missed as we ain't ever going to win it.

The lowest rung was indeed £50 before 2009, and their rationale was

"Replacing one of the £1m jackpot prizes with a wider mix of prizes and introducing the new £25 prize category will help us maintain the frequency of tax-free prizes – something that we know is particularly important to premium bond holders," a spokesman said.

so they evidently felt that carving the pie into more slices was better then, and they certainly like to emphasise the total number of prizes won each month, together with the 22K to one figure for each bond's chances, so presumably feel justified in retaining those, although that's not to say that other opinions are invalid!  Point taken about inflation erosion but am not aware of any suggestion that they should go below £25 though?

I hadn't appreciated that the survey you referred to was more comprehensive than what you'd posted, are you able to share all of it or is there some sort of confidentiality expected?

justwantedtosay

eskbanker said:
I hadn't appreciated that the survey you referred to was more comprehensive than what you'd posted, are you able to share all of it or is there some sort of confidentiality expected?

NS&I invited me by email. Clicking the link now just takes me to a page saying that I've completed the survey so I can't share it. It was pretty long, if repetitive. Basically it was asking which way of lowering the total prize value would you prefer. I can't understand why such surveys don't give a box for random suggestions. Someone - probably not me - might come up with a great idea they'd not thought of.

The current £25 would have been worth £15 in 2009. There's got to be a point when they realise it's not worth having a £25 prize.