NS&I Premium Bonds

#21

With shares still tumbling, it’s great to start the year with a £25 win on the good ole premium bonds! :smile:

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(Jim) #22

Nothing for me at all last year :frowning_face:

(Jim) #23

Hello…

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#24

Hope it’s a decent prize!

If you download their app, it tells you exactly how much you have won, without having to log into your NS&I account.

edit - added screenshot

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(Jim) #25

Cheers @weenie !
PS - Really enjoy your blog.

#26

Ha, thanks @Jim_mcgrain :smile:

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(Don) #27

I use Premium Bonds and a few high interest current accounts as the cash portion of my portfolio. I’ve found that I’m averaging 3% return on Premium bonds though that is obviously very lucky, my wife has been averaging 1.5% with hers. Premium bonds are unlikely to hit 1.4% with low amounts in as there is a minimum prize size, so if that is more than 1.4% of your portfolio you’d expect to wait a couple of years before winning even the minimum prize on average. This then diminishes your portfolio’s ability to compound

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#28

Even with large amounts invested in Premium Bonds the odds aren’t great. With £50,000 invested, and average luck, you would expect a return of £500. That return doesn’t even beat inflation.

Getting 3% is very good indeed. I don’t know how you do it. I’ve had these things for decades and get nowhere but I guess it is a lottery after all.

(Don) #29

Of course it doesn’t beat inflation, but most things don’t once you factor in tax unless you’re willing to accept some risk. With £50k in cash a single person can get about 1.8% interest using high interest current accounts, any more than that and there just aren’t enough accounts for them to open that will help them increase the average interest and it will be getting very similar to the 1.4% offered by premium bonds. At that point they will also either be paying tax on the interest if higher rate, so doing worse than premium bonds, or would be about to start paying tax on the interest if they save any more if they’re a standard rate tax payer. In that case it would make sense to use premium bonds as the winnings are tax free

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(Vladislav Kozub) #30

The question is, would you rather pay some low tax (considering that the first £500 is tax free for a higher rate) on a guaranteed income or hope to receive untaxed income which is not guaranteed? :thinking:

(Don) #31

Why not just do both, get you £500 tax free with high interest current accounts and also use premium bonds. The rest of in the interest income being taxed at 40% is pretty steep to me

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(Vladislav Kozub) #32

I have never dealt with premium bonds, but according to MSE, it seems like the odds of winning £25 are 1 in 24,500 or 0.004% for every £1 invested.

Complex probabilities aside, that could be roughly about £1 for our £25,000 invested or £12 in a year “on average”. Alternatively, you could get £375 interest with Marcus’ 1.6% and your NPAT will be £225 assuming you do not have any space in your cash ISA and pay 40% tax. Unless, of course, you hope to be very lucky and win something significantly more than £25. But the chances are very very slim.

#33

But you don’t get the chance of winning £1m every month and that too is part of the appeal for me.

Like a lottery but not, because I can get my cash back if I want, albeit eroded a little by inflation.

For me, premium bonds are a good cash compliment to my investments because their value isn’t going to rollercoaster any time soon.

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(Don) #34

The whole point of Premium Bonds is that on average they will return 1.4% so while individual months will have a large standard deviation, on average it is correct to use the 1.4% figure. I did the maths so others don’t have to. Based on being able to put £4000 in 5% interest, £6000 in 3% interest and the rest in 1.5% interest current accounts, the optimal for higher rate tax payers is maxing out the 5% and 3% and also putting £8000 at 1.5% interest. Any extra would then be better put into premium bonds. In the case of a standard rate tax payer you would have to get to £41,330 in 1.5% interest accounts (as well as the £10,000 in higher interest accounts) before it starts to be worth putting money into premium bonds

#35

When I win that jackpot, I’ll let you know if it’s been worth putting money into premium bonds :four_leaf_clover::joy:

(Ollie) #36

I’ve had them on and off for years. I seemed to get better returns when I had more invested - when I was below 10k it wasn’t great but the thought of winning big was exciting regardless:grinning:

#37

It’s official!

NS&I have today (1 February 2019) reduced the minimum initial investment for Premium Bonds from £100 to £25. This is the first time in the 63 years since Premium Bonds launched that the minimum investment has been lowered, and it is the lowest minimum purchase since 1993. The change will allow adults over the age of 16 to purchase or set up a standing order for a minimum of £25, or gift at least £25 to their children or grandchildren.

1/3 of people in the UK hold Premium Bonds.

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(George Bowlt) #38

I think of premium bonds as half price national lottery ticket plus I never loose my stake.
Usually never get more than a £25 prize but one month got 6 of them. So more than any interest I could have received. Maybe I’m just lucky. Have noticed on the winners list many winning large prizes with just a few bonds. Trust your luck

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