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  • FIRST POST
    • Former MSE Wendy
    • By Former MSE Wendy 24th Jul 07, 3:20 PM
    • 868Posts
    • 1,782Thanks
    Former MSE Wendy
    Premium Bonds Article Discussion Area
    • #1
    • 24th Jul 07, 3:20 PM
    Premium Bonds Article Discussion Area 24th Jul 07 at 3:20 PM
    This thread is to discuss the
    Premium Bonds: Are they worth it?
    article


    Also see the
    Premium Bond Probability Calculator
    to discuss the calculator specifically see the

    Premium Bond Calculator Discussion.

    To take part, click reply.
    Last edited by MSE Martin; 24-07-2007 at 5:19 PM.
Page 32
    • pmbsa
    • By pmbsa 14th May 18, 8:31 AM
    • 2 Posts
    • 0 Thanks
    pmbsa
    13 Years and not a single win
    I just found a certificate for 100 worth of bonds I bought for my daughter 13 years ago..... I checked last night and they havn't won a penny.... Sounds like the greatest "government backed" scam known to man. You have to applaud them for it.
    • coyrls
    • By coyrls 14th May 18, 11:54 AM
    • 1,041 Posts
    • 1,092 Thanks
    coyrls
    I just found a certificate for 100 worth of bonds I bought for my daughter 13 years ago..... I checked last night and they havn't won a penny.... Sounds like the greatest "government backed" scam known to man. You have to applaud them for it.
    Originally posted by pmbsa
    How much did you expect them to have won? Nothing is probably the outcome with the highest probability. They certainly couldn't have won a penny.
    • eskbanker
    • By eskbanker 14th May 18, 11:54 AM
    • 7,991 Posts
    • 8,897 Thanks
    eskbanker
    I just found a certificate for 100 worth of bonds I bought for my daughter 13 years ago..... I checked last night and they havn't won a penny.... Sounds like the greatest "government backed" scam known to man.
    Originally posted by pmbsa
    Hardly - if you'd taken the time to understand how they work, you'd have realised that the odds of winning nothing over 13 years with a 100 holding are 52.76%, i.e. it's more likely than winning something.

    Still doesn't make it a scam obviously, as you get your money back if you want, which isn't the hallmark of most actual scams reported on here....
    • firestone
    • By firestone 14th May 18, 1:23 PM
    • 269 Posts
    • 120 Thanks
    firestone
    One of this months 100,000 winners won on a 10 bond(total holding 20) bought in 1989 so maybe luck not scam
    • Kevin Clark 54
    • By Kevin Clark 54 25th Jul 18, 11:57 AM
    • 5 Posts
    • 0 Thanks
    Kevin Clark 54
    As the acronym ERNIE implies, it is a random draw which I believe is audited. Therefore it makes no difference how your numbers are held, it is pure luck.
    • polymaff
    • By polymaff 25th Jul 18, 12:26 PM
    • 2,237 Posts
    • 972 Thanks
    polymaff
    As the acronym ERNIE implies, it is a random draw which I believe is audited. Therefore it makes no difference how your numbers are held, it is pure luck.
    Originally posted by Kevin Clark 54
    Given NS&I's record of systematic incompetence it wouldn't suprise me if the process is not solely down to luck.

    I've yet to read any robust proof that it is not, though.
    • Kevin Clark 54
    • By Kevin Clark 54 25th Jul 18, 12:29 PM
    • 5 Posts
    • 0 Thanks
    Kevin Clark 54
    Despite having more than 6K in Premium Bonds, mostly for over 12 years, I have never won more than 25. On the first such occasion, ERNIE explained to me that this was a reserve prize, as the original winner had redeemed their bonds. I often wish they hadn't, so that rather than my number being pulled out last in one month's draw, it could have been selected first in the following month's draw.
    • polymaff
    • By polymaff 25th Jul 18, 12:55 PM
    • 2,237 Posts
    • 972 Thanks
    polymaff
    Despite having more than 6K in Premium Bonds, mostly for over 12 years, I have never won more than 25.
    Originally posted by Kevin Clark 54
    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.
    • eskbanker
    • By eskbanker 25th Jul 18, 1:23 PM
    • 7,991 Posts
    • 8,897 Thanks
    eskbanker
    On the first such occasion, ERNIE explained to me that this was a reserve prize, as the original winner had redeemed their bonds. I often wish they hadn't, so that rather than my number being pulled out last in one month's draw, it could have been selected first in the following month's draw.
    Originally posted by Kevin Clark 54
    In the absence of any smilies or equivalent indicators I'm not sure if you're being facetious or not, but, in the context of the amount of spurious myths that build up around premium bonds, you're not seriously under the impression that if your bond number was top of the reserve list but hadn't been allocated a prize one month, it would have been at the top of the pile next time round and therefore won a big prize?!
    • jamesperrett
    • By jamesperrett 25th Jul 18, 11:54 PM
    • 823 Posts
    • 449 Thanks
    jamesperrett
    Given NS&I's record of systematic incompetence it wouldn't suprise me if the process is not solely down to luck.

    I've yet to read any robust proof that it is not, though.
    Originally posted by polymaff
    I remember seeing an article many years ago that said that the actual random element of ERNIE was the noise measured across a pair of back to back zener diodes. The article at

    https://www.newscientist.com/article/dn6289-prize-draw-uses-heat-for-random-numbers/

    suggests that they now use transistors for the noise generating mechanism.
    • billybird13
    • By billybird13 25th Jul 18, 11:58 PM
    • 1 Posts
    • 0 Thanks
    billybird13
    Where is the best/safest place to buy premium bonds from. I am new to this.
    • ValiantSon
    • By ValiantSon 26th Jul 18, 12:15 AM
    • 2,537 Posts
    • 2,509 Thanks
    ValiantSon
    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.
    Originally posted by polymaff
    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.
    • ValiantSon
    • By ValiantSon 26th Jul 18, 12:17 AM
    • 2,537 Posts
    • 2,509 Thanks
    ValiantSon
    Where is the best/safest place to buy premium bonds from. I am new to this.
    Originally posted by billybird13
    They are run by NS&I. Here's the link:

    https://www.nsandi.com/premium-bonds

    If you really must.
    • eskbanker
    • By eskbanker 26th Jul 18, 12:31 AM
    • 7,991 Posts
    • 8,897 Thanks
    eskbanker
    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?
    Originally posted by ValiantSon
    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
    • By ValiantSon 26th Jul 18, 12:45 AM
    • 2,537 Posts
    • 2,509 Thanks
    ValiantSon
    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)....
    Originally posted by eskbanker
    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.
    • polymaff
    • By polymaff 26th Jul 18, 9:24 AM
    • 2,237 Posts
    • 972 Thanks
    polymaff
    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.
    Originally posted by ValiantSon
    Tax-free income.
    • Kallisti
    • By Kallisti 9th Aug 18, 12:16 PM
    • 36 Posts
    • 6 Thanks
    Kallisti
    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?
    Last edited by Kallisti; 09-08-2018 at 12:22 PM. Reason: Did a little research
    :: No Links in signatures please - FM ::
    • eskbanker
    • By eskbanker 9th Aug 18, 12:42 PM
    • 7,991 Posts
    • 8,897 Thanks
    eskbanker
    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....
    • polymaff
    • By polymaff 9th Aug 18, 12:55 PM
    • 2,237 Posts
    • 972 Thanks
    polymaff
    Premium Bonds really aren't all that attractive are they?
    Originally posted by Kallisti
    I guess that "attractive" has not been part of savers' vocabulary for a decade - but, as a savings income tax payer, Premium Bonds are OK by me.
    • Kallisti
    • By Kallisti 9th Aug 18, 3:12 PM
    • 36 Posts
    • 6 Thanks
    Kallisti
    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....
    Originally posted by eskbanker
    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!
    Last edited by Kallisti; 09-08-2018 at 3:18 PM.
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