Premium bonds currently go at 3.20 % tax free return + the tax free lottery wins.

Given the 24000-1 odds/pound, this means that if you invest £2000,
your odds are 12-1 at winning someting, or approximately once a year.
Given that the minimum prize is £50, which is 2.5%. Or a lot more if you win more or more frequently.

This works out to typicial annual return of 5.70% tax free.


I believe these are the best risk & tax free returns out there, probably beating ISA's?

Am I correct in working out the returns this way, and in assuming there's nothing better out there right now?

There is no return on Premium Bonds other than the prizes. The 3.2% NS&I quote is the typical prize return if you have average luck.

If you're a higher rate tax payer, then this can be worked backwards to a pre-tax return of 5.6%

The value you put on one of the £50's being 250k is another matter, and so is the risk of not winning anything at all (unlikely IMO)

Fingers

Thanks! I bodged that one allright. The website isn't very clear about this.

I knew it started looking too great when I worked that out to a pre-tax equivalent 9.5% return. I would've been surprised that Gordon would that generous.

Looks like my savings strategy will need some rethinking.

FWIW I had about £25k of pb's and they yeilded about £850 in the year which is a return of about 3.4%. Not sure I will hit the upper tax band this year as I was studying and doing a career switch (thanks to all that lovely STR lolly).

Not as good as the internet accounts like ING or EGG, but you don't ahem want them all in one basket.

I think that there is more chance of winning on the stupid tax than winning big on this one. But the capital is secure... inflation aside.

I'm bored with them now and come the next big buying opportunity in equities I will wave bye bye. Yes, I know that the next big buying opp in equities is probably now, but I have quite enough thank you.

I would up to 30k and hold on another year.