Reply to: BOOM: Premium Bonds

[woody1]

You can easily get 5.2% with instant withdrawal, that's £750pa extra on a £50k investment. I'm going through an MVL and have put the large initial distribution in a 5.2% interest account with Coventry BS. You can get higher rates by tying the money up more.

See https://www.moneysavingexpert.com/sa...best-interest/ for examples

I didn't realise you could get as much as that instant access.

However, the 3.7% with PBs is equivalent to 6.17% net of 40% tax.

Having said that, it's a close call because the return on PBs is not guaranteed. (We've achieved far less than 3.7% this year.)

[Snooky]

If you're a 40% taxpayer, it would be hard to beat 3.7% net even by tying the money up.

You can easily get 5.2% with instant withdrawal, that's £750pa extra on a £50k investment. I'm going through an MVL and have put the large initial distribution in a 5.2% interest account with Coventry BS. You can get higher rates by tying the money up more.

See https://www.moneysavingexpert.com/sa...best-interest/ for examples

[woody1]

That's if you're focussed on a single large prize.

Although I dream of winning a big prize, the reality is the odds of winning the £5000 prize, or above, during your lifetime are incredibly slim.

Mostly I just treat it like a savings account, and accept that the return is likely to average around 80% of the fund rate (currently c. 3.7% or £150/month on £50k).

Even as a non-taxpayer that's pretty good for instant access. You can only do significantly better by tying the money up.

If you're a 40% taxpayer, it would be hard to beat 3.7% net even by tying the money up.

[WTFH]

Or none.

Bottom line, it's difficult to average more than 80% of the fund rate in the long run because of the extremely low odds of winning larger prizes which account for 20% of the money paid out.

That's if you're focussed on a single large prize. It's like my sister in law who swapped hers so they were all the same number range because she said it meant she won more often.
Some people really don't get it.

It's tax free, instant access with no penalties.
In fact, it's a really good place to have your warchest.

[woody1]

That's to win 1 of those. It's possible to win multiple smaller values each draw.

Or none.

Bottom line, it's difficult to average more than 80% of the fund rate in the long run because of the extremely low odds of winning larger prizes which account for 20% of the money paid out.

Which one is it?

Sorry, it should have been:

£50.........0.96%
£500.......0.023%

[WTFH]

(Assuming max £50k holding)

For those like me, who are always hoping for a biggish win, the odds are not great.

On average, you stand to win:
the £500 prize every 3.5 years
the £1000 prize every 11 years
the £5000 prize every 113 years
etc.

That's to win 1 of those. It's possible to win multiple smaller values each draw.

With £50k holding, the odds of winning a given prize every month are:

£500.......0.96%

£500.......0.023%

Which one is it?

[woody1]

(Assuming max £50k holding)

For those like me, who are always hoping for a biggish win, the odds are not great.

On average, you stand to win:
the £500 prize every 3.5 years
the £1000 prize every 11 years
the £5000 prize every 113 years
etc.

If you only ever win the common £25/£50/£100 prizes, then the effective interest rate is 3.72% (80% of the 4.65% fund rate).

NB. figures derived from https://www.nsandi.com/get-to-know-u...ize-allocation

With £50k holding, the odds of winning a given prize every month are:
£100.......0.96%
£50.........0.96%
£25.........0.42%
£500.......0.023%
£1000.....0.0077%
£5000.....0.00074%

[woody1]

We've had pretty rubbish returns this year (on 2 x 50k). Fair few zilch months, and the odd 25/50 and occasional 100.

We did better when the interest rate was pants.

[TheDude]

£200 on a £20k investment.

[Uncle Albert]

Expected value for past 12 months (for £50k) is £1800 using data from https://www.nsandi.com/historical-interest-rates

I've "won" £1475, so have effectively had an average 2.95% [tax free] interest rate and contributed £325 to those lucky millionaires. My turn next month though

Past 12 months for me was exactly £1800, MrsAlbert got £1850 so pretty much bang on the "expected value".

[AtW]

£175

[AtW]

£400, not too shabby.

[pr1]

Expected value for past 12 months (for £50k) is £1800 using data from https://www.nsandi.com/historical-interest-rates

I've "won" £1475, so have effectively had an average 2.95% [tax free] interest rate and contributed £325 to those lucky millionaires. My turn next month though

date	PB rate	EV	"Win"	"Win" %
Dec-22	2.20	£91.67	£50.00	1.20
Jan-23	3.00	£125.00	£175.00	4.20
Feb-23	3.15	£131.25	£100.00	2.40
Mar-23	3.30	£137.50	£100.00	2.40
Apr-23	3.30	£137.50	£0.00	0.00
May-23	3.30	£137.50	£300.00	7.20
Jun-23	3.30	£137.50	£0.00	0.00
Jul-23	3.70	£154.17	£50.00	1.20
Aug-23	4.00	£166.67	£225.00	5.40
Sep-23	4.65	£193.75	£150.00	3.60
Oct-23	4.65	£193.75	£300.00	7.20
Nov-23	4.65	£193.75	£25.00	0.60
av|sum	3.60	£1800.00	£1475.00	2.95

[woody1]

Not if you’re a higher rate tax payer and want easy access to the money.

True.

[jamesbrown]

PBs were a reasonable bet when interest rates were near zero but now that you can get 6% (guaranteed) elsewhere they've lost much of their shine.

I plan to sell mine and add to my fixed rate savings account when it matures next year.

Not if you’re a higher rate tax payer and want easy access to the money.