premium bonds going forward (and other NS&I accounts I guess).

[didds]

Apologies if this has already been mentioned in the couple (more) NS&I rates general threads... i haven't waded through them all I confess.

The general advice/perception here for soem while has been PBs have been a reasonable punt given bank/BS etc interest rates have been so low the potential 1.4% rertun on PBs was quite attractive allied to the extreme outside possibility of an (alleged) £1M win.

With the effective rate dropping to just 1% very soon where does that leave that trade off with other interest bearing accounts in reality?

A quick shufti at moneysupermarlet suggests that anything with any easy-ish access doesnt even make 1%, and one can only marginally improve on it with eg 120 days notice (eg loss of interest for 120 days or a wait), and even tieing cash up for 5 years hardly beats that 1% anyway.

Which rather seems to leave peer-to-peer lending accounts...

didds

[langley59]

My advice based on years of experience, don't be tempted by peer to peer lending. I wish I had left my money invested in it on deposit at nil interest rate, I would have earned a far higher return...

[AleisterCrowley]

I have a moderate sum with RateSetter - which has been fine so far*.....although they are taking a bigger cut of interest to support their provision fund


*the Titanic was working great until it hit the 'wrong sort of water '

[Itsallaguess]

Which rather seems to leave peer-to-peer lending accounts...

I can't speak for other Premium Bond holders, but whilst any return from my money held in them is of course nice to have, the primary reason I've used Premium Bonds for that section of my cash assets is to ensure that the capital itself will always be there when I need it...

So whilst any drop in projected 'returns' might be unwelcome, the thought of looking at something like peer-to-peer as a home for that section of my cash assets is simply not something that I'd ever seriously consider.

For me, it's not particularly about squeezing returns out of my Premium Bond capital - it's about the 100% security of the underlying cash...

Cheers,

Itsallaguess

[didds]

cheers - I confess P2P always seemed very extreme and my attitude to risk is not very high. I suppose I was dangling a carrot and Ive received the backup I needed

cheers

didds

[kempiejon]

I can't speak for other Premium Bond holders, but whilst any return from my money held in them is of course nice to have, the primary reason I've used Premium Bonds for that section of my cash assets is to ensure that the capital itself will always be there when I need it...

So whilst any drop in projected 'returns' might be unwelcome, the thought of looking at something like peer-to-peer as a home for that section of my cash assets is simply not something that I'd ever seriously consider.

For me, it's not particularly about squeezing returns out of my Premium Bond capital - it's about the 100% security of the underlying cash...

Cheers,

Itsallaguess

I'd echo those motives, PB are a safe, easily accessible store of cash and like you I see a gain as a bonus. Also, though in these low interest rates the risk is not so great, PB returns are exempted for any tax unlike building society interest above the personal savings rate.

[kempiejon]

cheers - I confess P2P always seemed very extreme and my attitude to risk is not very high. I suppose I was dangling a carrot and Ive received the backup I needed

cheers

didds

I've done some p2p, perhaps 5 years back I was loaning a few £k, found it profitable but a few years in the rates reduced and to my mind the risk increased, now I'm in a queue (since march) trying to extract my last hundred quid. The interest is still being paid to my holding account.

[langley59]

now I'm in a queue (since march) trying to extract my last hundred quid. The interest is still being paid to my holding account.

Ditto £37k in a queue and £31k on a different platform unpaid after years despite there supposedly being security greater than the value of the loans...in reality borrowers either lied and the platform didn't validate the security or it gets spent covering administrator fees leaving little or nothing for the lenders.

[Maroochydore]

My slightly muddled thinking is this. Chances of winning say £25 have gone out from around 24000/1 to 35000/1. Even at 24000/1 that's a pretty long shot so actually I'm not too bothered about the increased odds.

However with interest rates tumbling I'm earning much less on cash holdings than I was.

So, the amount of £25 'wins' needed on PB's are somewhat less than they were to cover the lost interest.

Some hypo figures to illustrate:
£25000 saved at prior 1.5% = £375 interest pa = 15 'wins' to cover the lost interest
£25000 in Marcus at new rate 0.7% = £175 interest pa = 7 'wins' to cover the lost interest
Chances of a 'win' have gone out by 50% but there is also the chance of a bigger win than £25

Any flaws anyone can see in my logic?

On balance I'm going to stick with PB's although I did open a 1 year fixed rate bond at 1.17% today with Kent Reliance. I don't see rates getting past that in the next 12 months.

[swill453]

I haven't seen a new calculation, but when the prize fund rate was 1.4% the expected return for a full holding was about 1.27%.

So the new expected return for a full holding from December will be around 0.9%.

You pays your money...

Scott.

[richlist]

Many p.bond holders are 40% taxpayers. As p.bond prizes are tax free they offer competitive returns.

[XFool]

My slightly muddled thinking is this. Chances of winning say £25 have gone out from around 24000/1 to 35000/1. Even at 24000/1 that's a pretty long shot so actually I'm not too bothered about the increased odds.

It may be a "long shot" for one bond in one draw. However, there are 12 draws in a year and, if you have the maximum number of bonds it should mean a reasonably predictable yearly income.

Using current odds of 24,500/1 with 50,000 bonds and expecting all prizes to be £25:

12 * 50000/24500 = 24.49 so expecting 24 prizes in a year gives 24 * £25 = £600

£600/£50000 = 1.2% expected tax free return

With new odds of 34,5000/1 with 50,000 bonds and expecting all prizes to be £25:

12 * 50000/34500 = 17.39 so expecting 17 prizes in a year gives 17 * £25 = £425

£425/£50000 = 0.85% expected tax free return

[JohnW]

have gone out from around 24000/1 to 35000/1. Even at 24000/1 that's a pretty long shot so actually I'm not too bothered about the increased odds.

Is it 'decreased odds'?

[Maroochydore]

have gone out from around 24000/1 to 35000/1. Even at 24000/1 that's a pretty long shot so actually I'm not too bothered about the increased odds.

Is it 'decreased odds'?

Ha, ha, that got my logic skills working and as well doing some internet research.

Seems to have more chance of winning, the odds increase, therefore you are absolutely correct that the odds of winning have decreased.

Thanks for putting me wise.

[DrBunsenHoneydew]

Is it 'decreased odds'?

Ha, ha, that got my logic skills working and as well doing some internet research.

Seems to have more chance of winning, the odds increase, therefore you are absolutely correct that the odds of winning have decreased.

Thanks for putting me wise.

This is why bookmakers use a different language to avoid confusion.
They would say the "odds have lengthened" when the nag goes "out" from 24000/1 to 35000/1.
There is an unspoken unsaid word "against" in the phrase: The odds (against) are 24000/1.
Hence why when the number increases (against you) the chances of winning have decreased.