Author Topic: Are NS&I Premium Bonds a rip-off?  (Read 2508 times)

0 Members and 1 Guest are viewing this topic.

The Prophet

  • Global Moderator
  • Senior Member
  • *****
  • Posts: 364
  • Country: england
  • Financial & Economics commentator
Are NS&I Premium Bonds a rip-off?
« on: June 11, 2012, 09:42:55 am »
According to NS&I, the premium bond pot pays out 1,5% tax-free.
So a basic rate tax-payer would need an account paying 1.875% gross and a higher rate tax payer would need to find an account paying 2.5% to be better off than investing in premium bonds - in theory!

Fans of premium bonds will say that you have a chance of winning the big £1million prize each month.
But with 20 million people owning £42billion worth of bonds, the chance of winning this each month is 1 in 42,000,000,000 for each £1 bond held.
More realistic are the 1.75 million £25 prizes paid each month.  Even this is only 1:24,000 for each £1 bond held in each monthly draw.

So if you held £25 worth of premium bonds for 25 years you chance of winning just one of the a £25 prizes in any of the 300 draws would still be higher than 1 in 3.
If the £25 were invested in an account paying just 2% for the whole 25-year period, the £25 would have grown to £41.65.