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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 33
    • eskbanker
    • By eskbanker 9th Aug 18, 4:07 PM
    • 9,441 Posts
    • 11,068 Thanks
    eskbanker
    £500 was derived from the calculator.
    Originally posted by Kallisti
    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.

    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.
    Originally posted by Kallisti
    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:
    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%....
    Originally posted by eskbanker
    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!
    Originally posted by Kallisti
    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.

    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....
    • Kallisti
    • By Kallisti 9th Aug 18, 4:40 PM
    • 39 Posts
    • 6 Thanks
    Kallisti
    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:
    Originally posted by eskbanker
    #1 - admit when you're wrong. I got the wrong headline figure - I calculate the odds as being 1.2% immediately, 1.22% over 2 years, 1.26 over 4, 1.3 over 17 and 1.33 over a lifetime... Probably using the same method as you refer to (though I didn't look back to find it!).

    tax can and does make a significant difference for some, tipping the balance back towards PBs in those circumstances....
    Originally posted by eskbanker
    So, absolute return is one benefit of PBs and, personally, long-shot of a second home on an island somewhere is another. Ignoring the first, the second suddenly doesn't seem too much different. At worst (£50k over 5 years & a 1.35% rate), you're talking about £500 + £175 in the lottery which will probably be zero and a 1/45m chance of an island retreat (though to be fair, maybe the whole island) or put the lot in PB and get £500 + 1/35m chance of second home. Very much marginal and PB is less hassle/complexity.
    :: No Links in signatures please - FM ::
    • KenSim
    • By KenSim 31st Oct 18, 9:22 AM
    • 10 Posts
    • 6 Thanks
    KenSim
    Well its been a while since my post on premium bonds and I did say that it was a gamble without losing lots of money, I am well aware of the effect of inflation which you obviously thought that I hadn't been able to figure out for myself. Just thought I'd let you know that at the moment I am at just over 300% profit .Thats the beauty of a relatively low cost gamble.
    • eskbanker
    • By eskbanker 31st Oct 18, 10:48 AM
    • 9,441 Posts
    • 11,068 Thanks
    eskbanker
    Well its been a while since my post on premium bonds and I did say that it was a gamble without losing lots of money, I am well aware of the effect of inflation which you obviously thought that I hadn't been able to figure out for myself. Just thought I'd let you know that at the moment I am at just over 300% profit .Thats the beauty of a relatively low cost gamble.
    Originally posted by KenSim
    Looking back up the thread I see that it was me who observed that holding PBs loses value to inflation if you have average luck (in that the typical 1.2-1.26% return will usually be below inflation, even allowing for being tax-free).

    Obviously if you have significantly better than average luck then you can indeed outperform inflation but the fundamental point remains that if you believe that you can achieve 300% profit on an ongoing basis then you're in for some serious disappointment, so if the purpose of your post was simply a boastful "I told you so" then perhaps you'd be gracious enough to accept that there is a concept of beginner's luck.

    A £50 stake held for 6 months has a 1 in 34,790 chance of returning at least £150, which illustrates the likelihood of achieving 300% profit - you may have been the one at this stage but obviously the odds favour you being in the 34,789 in future!
    • Pete h
    • By Pete h 3rd Jan 19, 4:33 PM
    • 1 Posts
    • 0 Thanks
    Pete h
    Blanked again
    50k and no return again,first 24 months returns of over 2%,25 month nothing then £25,then£25 then nothing this equates to 0.3 % for first 3rd of 3rd year,suspicion is old bonds don't win,I'd heard that,I'm having my money back
    • robotrobo
    • By robotrobo 3rd Jan 19, 6:36 PM
    • 864 Posts
    • 742 Thanks
    robotrobo
    50k and no return again,first 24 months returns of over 2%,25 month nothing then £25,then£25 then nothing this equates to 0.3 % for first 3rd of 3rd year,suspicion is old bonds don't win,I'd heard that,I'm having my money back
    Originally posted by Pete h
    hard luck pete.
    we had 10 wins for december 2018
    • eskbanker
    • By eskbanker 3rd Jan 19, 6:39 PM
    • 9,441 Posts
    • 11,068 Thanks
    eskbanker
    50k and no return again,first 24 months returns of over 2%,25 month nothing then £25,then£25 then nothing this equates to 0.3 % for first 3rd of 3rd year,suspicion is old bonds don't win,I'd heard that,I'm having my money back
    Originally posted by Pete h
    Suspicion is you're believing old wives' tales, as per the common myths debunked at https://www.nsandi.com/ernie:
    Myth: Only new Bonds win prizes
    Each £1 Bond has an equal chance of winning, regardless of when or where it was bought. Over 95% of eligible Bonds have been bought since the year 2000. So even though Premium Bonds have been on sale for over 60 years, this is why newer Bonds seem to win more frequently. When ERNIE randomly generates winners, he doesn’t store any numbers, so there’s no way any Bonds can be left out.

    Myth: Old Bonds are left out of the draw
    Winning numbers are generated randomly and then matched against eligible Bond numbers afterwards – numbers aren't entered into or stored in ERNIE so there's no way that any Bonds can be left out of the draw.
    Measuring results of a random draw over a period as short as four months is ridiculous, so if you're wanting predictability then PBs were never the right product for you in the first place!
    • AnotherJoe
    • By AnotherJoe 3rd Jan 19, 6:43 PM
    • 12,513 Posts
    • 14,690 Thanks
    AnotherJoe
    50k and no return again,first 24 months returns of over 2%,25 month nothing then £25,then£25 then nothing this equates to 0.3 % for first 3rd of 3rd year,suspicion is old bonds don't win,I'd heard that,I'm having my money back
    Originally posted by Pete h

    How foolish. You invest in a lottery and then expect regular consistent returns, and when you get what you'd expect, randomness, you think its a fix !


    (and if you think old bonds dont win, yours are close to new, only three years old ) !
    Please dont criticise my spelling. It's excellent. Its my typing that's bad.
    • ennnceee
    • By ennnceee 25th Jan 19, 7:59 AM
    • 12 Posts
    • 1 Thanks
    ennnceee
    13 since 1956
    Hello, I know this is a silly question, but...

    Is there any way of confirming that these have been entered in every draw since 1956, and are still included, would you know?

    Thanks!
    Filiss
    • Zanderman
    • By Zanderman 25th Jan 19, 10:11 AM
    • 1,929 Posts
    • 4,662 Thanks
    Zanderman
    Hello, I know this is a silly question, but...

    Is there any way of confirming that these have been entered in every draw since 1956, and are still included, would you know?

    Thanks!
    Originally posted by ennnceee
    If you have premium bonds they're in the draw. There's no other option!

    Every bond is always entered, that's the whole basis of the draw.

    If you're worried that you've not won anything and think that implies they weren't included you're being overly suspicious. They will be included but the chances of winning are, as always, small and random. Especially if you only have 13. Even since 1956.

    I have had 1 (one!) since the early 1960s and I've never won either.

    Mrs Z-man on the other hand has a few thousand and sometimes wins £25, occasionally £100, but her chances are much greater as she has so many.

    Edited to add: I assume you've checked online to make sure you haven't missed a win?
    • polymaff
    • By polymaff 25th Jan 19, 12:45 PM
    • 2,503 Posts
    • 1,121 Thanks
    polymaff
    Is there any way of confirming that these [1.] have been entered in every draw since 1956, and [2.] are still included, would you know?
    Originally posted by ennnceee
    1. I very much doubt it.

    2. You could check the Bond Record on the NS&I website - but that will only confirm that NS&I regard those bonds as yours.

    Practically, you just have to trust NS&I. Sure, NS&I have been caught bungling virtually every facet of their remit - but you'll need some clout to get a trustworthy external body to audit NS&I.

    I've tried.
    Last edited by polymaff; 25-01-2019 at 12:50 PM.
    • ennnceee
    • By ennnceee 27th Jan 19, 5:38 AM
    • 12 Posts
    • 1 Thanks
    ennnceee
    Thank you both.
    Filiss
    • KTF
    • By KTF 6th Feb 19, 10:48 AM
    • 4,712 Posts
    • 1,931 Thanks
    KTF
    Does anyone use a spreadsheet to track the average return based on time held, prizes won, etc?

    I am trying to put one together but struggling with the formulas at the moment.
    • talexuser
    • By talexuser 6th Feb 19, 11:42 AM
    • 2,562 Posts
    • 2,026 Thanks
    talexuser
    I just have starting amount say A1 and total prizes B1 then increase is =A1/B1*100 as a %.

    Starting date is C1 and current date is C2 the time invested is
    =(YEAR(C2)-YEAR(C1))*12+MONTH(C2)-MONTH(C1) as no of months.

    then the equivalent yearly AER is the =% above/(no of months/12)
    • KTF
    • By KTF 6th Feb 19, 11:54 AM
    • 4,712 Posts
    • 1,931 Thanks
    KTF
    Thanks It was the yearly AER I was struggling to work out.

    Now it gives me a better idea of the return rather than the general % increase based on the total + prizes.
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