Are premium bonds worthless?

23 Comments -

Premium bonds are one of the most popular saving products in the UK. However, Christine Toner questions how good they really are.

Your Comments

Guest (not verified):
Fri, 11/02/2011 - 13:16

I think the chance of winning a large prize is much better then a few extra quid that you get after tax (or not) in a high interest paying account.
There’s not many investments that give you a real chance of changing your life and this is one, you may not win a bean but at least you were in with a shot, what exactly is £0k going to do in terms of changing your life in an account these days! Even if you invest the minimum of £100 that’s still a chance of winning big money, I disagree with comments in this video and think current rates are so poor that this is definitely worth a ‘safe’ punt.

Guest (not verified):
Wed, 09/03/2011 - 14:18

we have two blocks of £5000, which i know is quite a few but last year alone we won five £25 & one £100 this was more than we would get in interesti think!
At least you have a chance every month of winning something, not like the lottery when you have to keep paying out.

Guest (not verified):
Sat, 25/06/2011 - 10:00

I have held £10 worth of premium bonds since 1964 when that was my weekly wage! I have never won anything.

Guest (not verified):
Sat, 25/06/2011 - 10:30

We have the maximum amount of Premium Bonds and although when we first started we got lots of prizes, have not won anything in nearly 6 months so are now thinking of putting the money into NSI bonds for a year or so and see how the interest rates go.

Its just pure luck, if you have the money to not worry about then its a good thrill each month to see if you have won, but otherwise not. You pays your money and takes your choice.

Guest (not verified):
Sat, 25/06/2011 - 12:44

If you have a mortgage and money to spare then the wisest thing to do is to pay the extra off your mortgage, think what you will save if, for example, you still have 10 to 20 years to run on your mortgage. It is the wisest thing to do with spare cash and is a no brainer really.

jonglew:
Sat, 25/06/2011 - 18:02

At the moment gold and silver are the only bets in town. BUT, and I capitalized it as it's a big one, you could lose some (but not all) of your money if they go down in value.  However, that's as unlikely as I don't know what - but it ain't going to happen in the near future. So, as the last commentator said - vote with your pockets and buy physical gold and silver - they won't let you down all the time there's so much debt out there.

alanhs:
Wed, 20/07/2011 - 13:38

Don't forget the prizes!!! are tax free and as far as I know you don't have to declare on income tax returns an added bonus! Must admit when first bought a block for family and children won quite a lot but slowed down now and prize money has halved £50 is now £25 etc - we live in hope, better than the lottery at least money is being used (hopefully wisely by the government) rather than on strange lottery give aways.

Guest (not verified):
Wed, 20/07/2011 - 15:29

My mother has £20k in bonds that have given her a return of between 3 and 5% over the past few years. All her money is tied up to pay for nursing care, but this is her one excitement. Each time a prize cheque turns up she is thrilled. Some months she wins nothing, others £50, but the return has definitely been better than her "high interest" account at HSBC for the past few years.

Recrec (not verified):
Wed, 24/08/2011 - 18:18

They may be worthless but they still pay me a better rate of return than one of my investments! That has been well into negative territory for the past four years and I doubt if it will improve much in the near future. My relatively small amount of bonds is actually performing better than most of my investments!

Guest (not verified):
Wed, 24/08/2011 - 18:54

my son was given £500 worth of bonds and he won £25 in the first two months. thats more than the bank would have given him in a year, so at the moment quids in

Howarddiver (not verified):
Thu, 25/08/2011 - 09:29

I held the maximum of £30k for a number of years and the most i ever won in a year was £1600, about 6% return at the time when interest were 6.5%.But since interest rates fell and therefore the prize money from ernie the winnings reduced.so i cashed them in and put the dosh into isa's giving me a guaranteed 3.75% now tax free fixed and out of the interest i have a £5 punt on the lottery each week = £260 per year, best of both worlds and better odds on the lottery than premium bonds £1million prize which is trillions to one..

louisajonas (not verified):
Mon, 26/09/2011 - 09:53

My mum swears that you should cash them in and buy new ones every so often to "refresh" your numbers...and she should know, she regularly wins £25s and £50s! I would say at least 3-4 a year!

vitus:
Wed, 30/11/2011 - 17:49

We have won regular small amounts every month , beating

the interest from banks . if you want risk free investments , the interest rates are very low . Not even long term bonds will not beat the inflation , over 5% at the moment . It is always

interesting to check on line if we have won , and the money is save . Vic

yeleva:
Wed, 18/01/2012 - 16:26

I have the maximum holiding and average winnings of £25 per month.Months of December and January, not a bean.
 
 
 
 

yeleva:
Wed, 29/02/2012 - 23:37

 I have maximum holding. 3 out of the last six months have not won a penny.   I normally average about £25 a month.
 

freeholder:
Fri, 27/04/2012 - 13:17

 I have the maximum holding (isn't it about time they increased that?) and win consistently small sums amounting to about 1.25% of capital invested. And there's always the chance of something bigger ... A few years ago I won 25k! I think you also have to remember its not always just the payouts on investments but how safe they are (partic these days). NS&I couldn't be safer. And that's a relief.
 

equitymcx:
Sat, 21/07/2012 - 10:21

If you buy a bond that pays an interest rate over and above the market interest rate, implicit in your purchase price is something called the premium. The premium is just the market's way of adjusting the price of a bond that pays too high of an interest rate.
Stock Tips

Mary Hewson:
Mon, 10/09/2012 - 15:38

I have the maximum in Premium bonds, at present, my winnings are producing appr 5% I enjoy checking the results each month, and the money is in safe hands! plus I don't have to pay tax on any winnings. At present,  I don't need to draw them out, so I shall stick with what I have.

cluffy:
Mon, 11/02/2013 - 21:47

I would just like to know who wins the million pounds? It`s quite a substantial sum but you never hear of anyone who`s won it. Surely there should be a bit more publicity to it, if only to say, 'This months winner lives in............'!

Pedros143:
Fri, 26/04/2013 - 09:40

I have held a lot of bonds in my name and family members for over 40 years and have only ever had one £25 win.  Given annual inflation and possible earnings on the market, I have been a complete mug to have held the bonds at all.
When you hear of people averaging 2% or 5% they are forgetting that even RPI in some years has been more than that.  They have actually lost money like me.  Happy days!!

Hamilton:
Fri, 26/04/2013 - 10:47

Premium Bonds are much like any other Lottery or game of chance.
To decide whether or not to "invest" in them you simply have to understand the facts and the risks involved.
For a basic rate taxpayer, for every £1000 "invested" in PB's, the NET loss of interest (or return) is currently approximately £25 a year (or £20 a year for a Higher Rate tax payer) - when compared to a Building Society deposit account.  This could be regarded as buying just two £1 Lottery tickets every month.
With the governments continuing policy of money printing (quantitive easing) and desperately trying to keep interest rates low, £1,000 today will only likely be "worth" around £950 in a years time.
So, if you leave your £1,000 in a Building Society your "real" worth in a years time will be less than when you started! i.e. approx £950 PLUS £25 interest.
If you "invest" that same £1,000 in PB's, and you don't win anything, your "worth" will be £950.
In either of the above scenarios you are effectively losing money, but at least with the PB option you stand a chance of actually improving your net worth, even if it does have the potential of losing you a bit more than a "safe" deposit account.
You pays your money and you takes your chance.

Hamilton:
Fri, 26/04/2013 - 10:49

Premium Bonds are much like any other Lottery or game of chance.
To decide whether or not to "invest" in them you simply have to understand the facts and the risks involved.
For a basic rate taxpayer, for every £1000 "invested" in PB's, the NET loss of interest (or return) is currently approximately £25 a year (or £20 a year for a Higher Rate tax payer) - when compared to a Building Society deposit account. This could be regarded as buying just two £1 Lottery tickets every month.
With the governments continuing policy of money printing (quantitive easing) and desperately trying to keep interest rates low, £1,000 today will only likely be "worth" around £950 in a years time.
So, if you leave your £1,000 in a Building Society your "real" worth in a years time will be less than when you started! i.e. approx £950 PLUS £25 interest.
If you "invest" that same £1,000 in PB's, and you don't win anything, your "worth" will be £950.
In either of the above scenarios you are effectively losing money, but at least with the PB option you stand a chance of actually improving your net worth, even if it does have the potential of losing you a bit more than a "safe" deposit account.
You pays your money and you takes your chance.

melp1:
Sat, 27/04/2013 - 16:18

We've held £29,000 for 12 years
Biggest annual win £1,300 in 2008 but now average only £475 per annum since prize amount has been lowered to £25.
Still theres always the chance you could have a big win and its very easy to cash them in if you want your money.Wish they wouldn't waste money sending the forms and envelopes with the cheques, asking you if you would like to reinvest your winnings. I'm sure everyone is capable of requesting a form if they wish to do this.