Premium bonds - raise limit?

Oblivion

Pendle_Gazza wrote: »

I think I'd be tempted to cash mine in if it went any higher (IMHO £30K is too much as it is), and I'm actually one who likes the concept of them and has a small percentage of my dosh in there!

That's an interesting point of view. I suppose there is a valid argument that says the more you raise the personal limit, the more you squeeze out the earnings potential of those who can only afford a small holding.

Dave.

Milarky

If they raised the limit now it would look dodgy would it not? It would mean that the gov t was seeking more (net) borrowing. Generally to raise the supply of something you have raise its price (the notional interest rate). PBs are actually still quite cheap for the govt - after allowing for the notional tax foregone.

So it always becomes a balancing act, I suppose? How cheaply can they raise extra PB money - as opposed to other methods. I assume there is a memorandum of understanding between the National Savings and HMG to target a certain rate of growth in PBs - say the nominal growth in GDP - about 6%* a year...

They could go further than that but, because they operate in a competitive market, they can't expect to push their luck and not see the banks (etc) start to complain.

*actually that would mean that (at 3% or so) a willing and gullible public were actually paying more into PBs than ever got paid out in prizes....

and maybe the 'trigger' for a higher maximum holding would also be an increase in the top prize(s)? Human nature being what it is - if the top prize were increased from £1m to £1.5m and the limit increased from 30k to 40k (50k would look dodgy) - people would assume that they had to be more in PBs to get the more value prizes..

nrsql

>> It would mean that the gov t was seeking more (net) borrowing.
Yep - that's my point.

>> PBs are actually still quite cheap for the govt
Exactly.

>> Generally to raise the supply of something you have raise its price
Nope - keep the price the same increase the limit. Actually if the supply increases usually the price goes down - look at oil, gold, houses...

>> they can't expect to push their luck and not see the banks (etc) start to complain.
That seems reasonable and could be the reason.