Premium Bonds as an investment?

Have you done a search, as this topic has been discussed on several occasions?

As someone else suggested do a search - but by coincidence I purchased £30,000 of PB's yesterday.

Look for the Premium Bond diary I did last year - this year I am doing even worse. :-(

basically with a PB you are gambling with the interest you could have recieved had you put the cash in a high interest account. you're techincally quite a bit better off putting your money in ING et al, and then spending say, half the interest on national lottery tickets. if you want to gamble then go for it, but the treasury do a lot better out of PB holders than holders do out of the treasury.

You seem to have neglected to consider that PBs are tax free.

For a higher rate tax payer the average return is as good as can be got elsewhere.

They are crap for non-tax payers though.

tim

Possibly so Tim, I haven't done the maths.

Whatever happened to the "Premium Bond Diary" in this group? Was the poster luckier, or unluckier than average?

The Premium Bond 'Interest Rates' are published here..

Was about average last year - worse this year.

Yes, NSI publishes it.

But remember that if you don't win the jackpot, and most people don't, then your return will be lower than that.

The web site says they're giving 3.2% at present "tax free"; grossed up at 20% tax rate, that's just 4%. It's better for high rate payers of course. Compare ING, who offer 5% gross iirc. On average (many bonds, many months), you'll get your 3.2%; but of course there's the chance of a goodly sum - or more likely (??) of a slightly reduced return. I know this has been discussed recently, but I don't think anyone mentioned the highly skewed prize distribution, and the effects of this on returns. I've been meaning to program a simulation to see what outcomes are reasonably likely - haven't got round to it yet, and I'm not quite sure they give enough info for an accurate assessment.

Do they provide a break-down of the prize-money? 3.2/4% is all very well but if this is zoned around a small number of relatively large payouts rather than a more abundant pay-out of smaller prizes then the outlook - other than for the eternal optimists - is surely quite depressing.

What's best for the punter? What's likely to lure the largest number of savers? Are these two goals compatible?

Lets say for a minituarised model they pay out a total of £2million with £1million of this divi'd up into the really small prizes - these are essential just to keep people talking about it and watching their mail for the magic envelope. What sort of payout distribution for the other million would most participants prefer to see? e.g.

1 payment of £1M 10 payments of £100,000 100 payments of £10,000 etc.etc,

Perhaps, to optimise the scheme, National Savings should open it to votes - a truly democratic lottery.

My partner got a £500 win last week (she's got the full £30k). She was thrilled to bits but I felt a bit depressed for her because she's lagging behind the ING return at the mo.

90% of the prize fund is paid in 50 and 100 wins.

thanks for that - I was looking but I'm having a bad google day.

Yes. A quick look at the National Savings and Investments website in their Premium Bond section takes the air out of the conspiracy theory - the breakdown of prizes can be found at .

I don't hold any myself, but have been considering buying some. It also seems that you can only keep a max of £30K invested.

They do have a nice selection of tax free savings products though, allowing deposits of (according to the website) £93K annually. See .

curiosity wrote: ...

There's an old gambling game called Crown and Anchor. When the table-holder pays out, he pays quite large sums - very eye-catching. When the punter loses, he loses only small amounts. But the table-holder will win round about 5% of stake money overall, iirc; quite lucrative.

I sort of get the feeling premium bonds (and the lottery) are rather in the same sort of league - a few large payouts to 'encourage' the marks; on average you do better elsewhere.

I really must get that program written...........

And a quick note that using their quoted 1/24000 odds, then a holder of

6000 bonds has a 95% chance of winning *something* in a year (that's 22% per month). Of course, it might be only a single £50 win :-) And assumes I've got my stats right!

yes, it wouldn't surprise me if at some point they introduce a £25 pay-out to increase the numbers receiving prizes. Part of the fun must be receiving that envelope; prior to opening it, and with all rationality cast aside, there is always going to be the feeling that this time it might be you. The £25 prize might just about be enough to be acceptable as a bulwark against disappointment.

In message , curiosity writes

I cant see them reducing the payout. The cost of sending out the payment would be disproportionate for the prize. When they increased the p[ayout to £1m and increased the minimum to £100 there were screaches from staff and public saying fewer people would invest, whereas more are sold now than ever before.

AIUI, though, the work is being outsourced to India.

I had in mind keeping perhaps half of the existing £50 prizes and divi-ing up the other half into 25 pounders - they'd keep their overall payout the same but could dish out just under another half million prizes. I think getting that envelope, and the way you feel just before you open it, is key to the success of premium bonds. Lay psychology - I could be wrong.