Premium Bonds Article Discussion Area
Comments
-
Given your relatively low holding - and that, as is typical, last month 98.2% of the prizes were £25 ones - you are surprised?
Predictability comes with a big holding. My £50k is a very steady producer of nearly 90% of NS&Is declared rate.
Just as expected.
So your approximate return is about 1.26%? Why not put that money into an easy access savings account (or a fixed rate account) and earn substantially more?
I know, people like the possibility of winning one of the big prizes. I guess I will never understand. To me it is just a massive waste of time.0 -
billybird13 wrote: »Where is the best/safest place to buy premium bonds from. I am new to this.
They are run by NS&I. Here's the link:
https://www.nsandi.com/premium-bonds
If you really must.0 -
I suspect your question is largely rhetorical but one obvious differentiator for some is tax - a higher rate taxpayer already using their £500 PSA would need to earn gross interest of 2.1% to equal that 1.26% net return, and easy access accounts paying 2.1% on £50K are somewhat tricky to find (especially for those already benefitting from the small number of decent current accounts still available)....ValiantSon wrote: »So your approximate return is about 1.26%? Why not put that money into an easy access savings account (or a fixed rate account) and earn substantially more?0 -
I suspect your question is largely rhetorical but one obvious differentiator for some is tax - a higher rate taxpayer already using their £500 PSA would need to earn gross interest of 2.1% to equal that 1.26% net return, and easy access accounts paying 2.1% on £50K are somewhat tricky to find (especially for those already benefitting from the small number of decent current accounts still available)....
You're correct, it was largely rhetorical.
Easy access accounts paying 2.1% may be hard to find, although fixed rate accounts are less difficult.
There is also the question as to whether someone needs to hold so much in cash, but that's another debate entirely.0 -
ValiantSon wrote: »So your approximate return is about 1.26%? Why not put that money into an easy access savings account (or a fixed rate account) and earn substantially more?
I know, people like the possibility of winning one of the big prizes. I guess I will never understand. To me it is just a massive waste of time.
Tax-free income.0 -
I've always liked Premium Bonds for that reason. I won't even keep my head above inflation but at least I get a free lottery.
But then today I thought...
If I have 50,000 to invest and put it all in premium bonds, I'll probably earn 500 and have a chance at higher prizes up to 1 million (12 times per year).
Say I put it in 1.5% savings instead...
Then I can match that 500 interest and add another £250. That allows me to buy 125 lottery tickets, or 10-11 per month.
Anyone know of a calculator that gives me expected winnings on buying 11 lottery tickets similar to the Premium Bonds calculator? I assume it's a better investment (both are paying £500), because that £250 can also win the small prizes...
EDIT:
So, looking at https://www.national-lottery.com/lotto/prizes, two prizes that would even figure in probability for £250/year... an extra ticket 10 in 103 times (that's an extra 25 tickets per year and £25/97 tickets and I have closer to 300 than 200 after my bonus tickets, so lets assume £75 extra a year...
So, I retain my (very far) outside chance of becoming rich, and £500 income from savings...
Premium Bonds really aren't all that attractive are they?:: No Links in signatures please - FM ::0 -
£50K of PBs should return at least £600 (the median is £50 per month), i.e. 1.2%, although as above typical returns should be closer to 1.26% (and better than that over the long term), while the current best-paying genuinely easy access account is 1.35%, so a gap of less than 0.1% is more realistic than the 0.5% you've assumed....0
-
Before I start, it seems there's an error in the article? It lists the £100 and £50 prize numbers as equal but the odds different. I see NS&I have a website with the prize volume being equal, I assume that's (the cause of) the mistake?£50K of PBs should return at least £600 (the median is £50 per month), i.e. 1.2%, although as above typical returns should be closer to 1.26% (and better than that over the long term), while the current best-paying genuinely easy access account is 1.35%, so a gap of less than 0.1% is more realistic than the 0.5% you've assumed....
£500 was derived from the calculator. Over the long term (short of near-infinite time), unless you win big prizes (wholly unlikely and the reason for my post separating out the chance of a big win being an attractive selling point), stable below 1.26%.
You're likely to win the £50 prize once every 27 months with a £50k investment, anything more (assuming the mistake in the first paragraph) is very unlikely (once every four years, then once every 9). So, taking them out entirely, your short-term chance (one year) is closer to 1.08%, rising to 1.17% over 8 years.
As for savings rates, #thatscomplicated, but the savings page suggests anything from 1.35% to 5% (limited ££), so that really depends on your appetite for complexity!:: No Links in signatures please - FM ::0 -
The bit you're referring to is wrong, or at best misleading. The full odds page for £50K over a year only gives odds for £500+ (87%) and £750+ (24.7%), so the summary correctly identifies that £500 is a more likely outcome than £750, but ignores all the intermediate data points - as the median return on £50K in any given month is £50 (each individual bond is 1 in 24,500) it follows that the annual equivalent will be at least £600.£500 was derived from the calculator.
No, I did the odds in another thread recently, based on the NS&I published prize draw breakdown, and 1.2% is the expected return in £25 prizes, rising slowly closer towards the full 1.4% as the larger prizes are added in:Over the long term (short of near-infinite time), unless you win big prizes (wholly unlikely and the reason for my post separating out the chance of a big win being an attractive selling point), stable below 1.26%.
You're likely to win the £50 prize once every 27 months with a £50k investment, anything more (assuming the mistake in the first paragraph) is very unlikely (once every four years, then once every 9). So, taking them out entirely, your short-term chance (one year) is closer to 1.08%, rising to 1.17% over 8 years.Pretty sure we've discussed this before but the nominal figure is 1.4% - the more realistic median expectations are indeed lower but are a continuum rather than a specific single figure, i.e.
98.20% of the prizes (the £25s) would return 1.20%
98.98% return 1.22%
99.77% return 1.26%
99.94% return 1.30%
99.99% return 1.33%
and then progressively smaller increments up to 100% = 1.4%
In other words, a return of 1.26% is more likely than 1.3% but less likely than 1.22%....
Indeed, but as PBs can be cashed in at any time then the obvious equivalence (at £50K level, which obviously rules out current accounts, etc) is an easy access account, although strictly if there were 30-day notice accounts they'd probably be a bit closer.As for savings rates, #thatscomplicated, but the savings page suggests anything from 1.35% to 5% (limited ££), so that really depends on your appetite for complexity!
But yes, as is often pointed out on this thread and other PB ones, it is usually possible to beat likely PB returns with guaranteed interest from savings accounts at a gross level. However, as per the posts immediately before yours, tax can and does make a significant difference for some, tipping the balance back towards PBs in those circumstances....0
Categories
- All Categories
- 343K Banking & Borrowing
- 250K Reduce Debt & Boost Income
- 449.6K Spending & Discounts
- 235.1K Work, Benefits & Business
- 607.7K Mortgages, Homes & Bills
- 173K Life & Family
- 247.7K Travel & Transport
- 1.5M Hobbies & Leisure
- 15.9K Discuss & Feedback
- 15.1K Coronavirus Support Boards