Premium bonds - how do they work?
Discussion
I've tried to find out and from here...
www.nsandi.com/products/pb/rates.jsp
this....
[quote]Odds
The number of prizes in each draw is determined by dividing the total number of eligible £1 Bond units by a number specified by the Treasury, [/quote]
WTF??? Let's have alook at the T&C.....
www.nsandi.com/products/pb/termsandconditions.jsp
says
[quote]5. The number of prizes in each month’s draw will be calculated by dividing the total number of Bond units eligible for that draw by a specified number (“the odds”
as follows:
total number of eligible Bond units = total number of prizes
odds for draw
The specified number is determined by the Treasury from time to time. The current specified number has been published in the gazettes and any change to the specified number will also be published in the gazettes. The current specified number is also set out in our Interest Rates leaflet available at post offices and from NS&I, and on our website at www.nsandi.com.
[/quote]
Points if any of you can find that number, 'cos I can't.
So Premium bonds have an arbitary Treasury set chance of winning which diminishes the more bonds are issued.
I was considering them, but now I've checked this looks like a joke. Am I missing something?
www.nsandi.com/products/pb/rates.jsp
this....
[quote]Odds
The number of prizes in each draw is determined by dividing the total number of eligible £1 Bond units by a number specified by the Treasury, [/quote]
WTF??? Let's have alook at the T&C.....
www.nsandi.com/products/pb/termsandconditions.jsp
says
[quote]5. The number of prizes in each month’s draw will be calculated by dividing the total number of Bond units eligible for that draw by a specified number (“the odds”
as follows: total number of eligible Bond units = total number of prizes
odds for draw
The specified number is determined by the Treasury from time to time. The current specified number has been published in the gazettes and any change to the specified number will also be published in the gazettes. The current specified number is also set out in our Interest Rates leaflet available at post offices and from NS&I, and on our website at www.nsandi.com.
[/quote]
Points if any of you can find that number, 'cos I can't.
So Premium bonds have an arbitary Treasury set chance of winning which diminishes the more bonds are issued.
I was considering them, but now I've checked this looks like a joke. Am I missing something?
I think they set an interest rate which then determines the number and value of prizes. Currently around 3% iirc, so not all that high considering the amounts they're dealing with...but I could be wrong.
Interestingly, I had some literature from NS&I last month regarding the two £1 million prizes...it said 'up to two £1 million prizes each month'
Does that mean some months there may only be one top prize?
I've won a fair bit with them, but it's nothing compared to the interest I would have got in a bank account.
Interestingly, I had some literature from NS&I last month regarding the two £1 million prizes...it said 'up to two £1 million prizes each month'
Does that mean some months there may only be one top prize? I've won a fair bit with them, but it's nothing compared to the interest I would have got in a bank account.
According to this:
http://uk.biz.yahoo.com/moneyweekly/p
The odds are 23,636:1 though that was 6 months ago so maybe a little different, but probably roughly right.
http://uk.biz.yahoo.com/moneyweekly/p
The odds are 23,636:1 though that was 6 months ago so maybe a little different, but probably roughly right.
tertius said:
According to this:
http://uk.biz.yahoo.com/moneyweekly/p
The odds are 23,636:1 though that was 6 months ago so maybe a little different, but probably roughly right.
The odds of what??
Winning anything, or winning a million quid?
What are the odds of winning 2 grand?
No proper numbers here IMO.
Did you follow the link?
The odds are those of winning any prize with one single premium bond in any one month's draw.
So if you have 1 premium bond it'll 23,636 months before you win anything (on average
)
If you have 23,636 bonds you should win something every month.
Edited to add: no, you probably aren't missing anything, the returns are not fantastic, certainly an "average" return is less than you can get from a building society, BUT, they are tax free, and as Simpo says you can get your money back AND you might just get very lucky indeed.
Look at it this way all you can lose is the interest you would have earned on the money, had you put it in a building society. Also you get the fun of opening those envelopes when they do arrive, wondering ... is it ... could it be ... ah, 50 quid again.
>> Edited by tertius on Tuesday 14th February 22:57
The odds are those of winning any prize with one single premium bond in any one month's draw.
So if you have 1 premium bond it'll 23,636 months before you win anything (on average
) If you have 23,636 bonds you should win something every month.
Edited to add: no, you probably aren't missing anything, the returns are not fantastic, certainly an "average" return is less than you can get from a building society, BUT, they are tax free, and as Simpo says you can get your money back AND you might just get very lucky indeed.
Look at it this way all you can lose is the interest you would have earned on the money, had you put it in a building society. Also you get the fun of opening those envelopes when they do arrive, wondering ... is it ... could it be ... ah, 50 quid again.
>> Edited by tertius on Tuesday 14th February 22:57
mattley said:
Did you follow the link?
The odds are those of winning any prize with one single premium bond in any one month's draw.
I get this bit, but how does the treasury decide whether it's 24k:1 or 23.6k:1 ?
Err, based on how much money they want to pay out I imagine.
But seriously the rates don't change that often and I think its a simple commercial decision - if they make it too difficult to win money will be withdrawn, too easy, they'll lose out.
Btw, I don't know why you couldn't find it on the NS&I website, its here:
www.nsandi.com/products/pb/rates.jsp
Without getting too technical (because I'm incapable of that), a punter buying premium bonds is likely to yield you a 3% return on investment. However, there is no Tax payable on any winnings. As such, 3% is equivalent to (circa) 5% in, say,a Bank or Building Society,etc.. Also, you have the chance to win £1m - I belienve there are 2 million pound winners per month.
tertius said:I think it's their actual method for deciding on the 24,000:1 that he's after...
Did you follow the link?
The odds are those of winning any prize with one single premium bond in any one month's draw.
I get this bit, but how does the treasury decide whether it's 24k:1 or 23.6k:1 ?
Err, based on how much money they want to pay out I imagine.
But seriously the rates don't change that often and I think its a simple commercial decision - if they make it too difficult to win money will be withdrawn, too easy, they'll lose out.
Btw, I don't know why you couldn't find it on the NS&I website, its here:
www.nsandi.com/products/pb/rates.jsp
srebbe64 said:Albeit a microscopic chance...one in 13 billion for each £1 bond
...Also, you have the chance to win £1m - I belienve there are 2 million pound winners per month.
You're approximately 930 times more likely to win the National Lottery Lotto jackpot...puts Premium Bonds into perspective.
fid said:
...Also, you have the chance to win £1m - I belienve there are 2 million pound winners per month.
You're approximately 930 times more likely to win the National Lottery Lotto jackpot...puts Premium Bonds into perspective.
Very interesting stat, but does it take into account that,unlike the lottery, your numbers are permanent and that you can take the cash away at any point in time?
Personally, I simply like to spread around my investments so I'm not vulnerable to any single sector - lots of eggs in lots of baskets, so to speak.
fid said:
...Also, you have the chance to win £1m - I belienve there are 2 million pound winners per month.
You're approximately 930 times more likely to win the National Lottery Lotto jackpot...puts Premium Bonds into perspective.
True but each go doesn't cost you a pound.
Back to the original question now I've actually read the page that I myself linked, I understand slightly better the situation (
to self) The value of the prize fund is defined by the interest rate, currently 3%, this goes up and down as the total number of bonds held goes up and down.
The "set number" (ie the 24,000) determines how many prizes there will be, and hence the distribution of the 3% fund. The smaller the number (eg 10,000) would mean many more smaller prizes would be required; the larger (eg 100,000) would mean more bigger prizes were needed, and if it got big enough only one person would win each month but they would be very happy.
So I guess the selection of the number is designed to be small enough to ensure that people get a prize sufficiently frequently that they hold onto their bonds. remembering that the smallest prize is £50, so it can never get really small.
srebbe64 said:Not sure...but mustn't forget that we could win £100,000 or less... every month until our luck's really in for the £1 million
...Also, you have the chance to win £1m - I belienve there are 2 million pound winners per month.
You're approximately 930 times more likely to win the National Lottery Lotto jackpot...puts Premium Bonds into perspective.
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