Bonding
The name's Bond. .
And - just like - it's always had a whiff of glamour.
The machine that picked the winning numbers - - became the most famous computer in the land.
For a lucky few, the top prize opened the door to a life of champagne and fast cars - at least for a short period of time.
And, unlike the pools or the National Lottery, you got your money back afterwards whether you won or not - minus, of course, the effects of inflation.
It's an investment that many of you have stuck by, year after year. 40% of the population holds at least one.
But now some of you are shaken and stirred by premium bonds.
You've been emailing over the last few days, to complain about a cut in the prize pot.
If you've never bought them, premium bonds don't pay you any interest directly - instead, the interest is collected in a pot and given out as prizes.
But the total amount to be paid in January works out at an interest rate of just . That compares with rates of more than 5 percent, available this morning on some .
For some of you, that's just not enough.
You're also unhappy about how the prizes are distributed.
Some Working Lunch viewers think there aren't enough smaller prizes, to spread the winnings around. Others think the big prizes aren't big enough (even though the odds of winning are greater than for the National Lottery).
And you're not convinced by the argument that you earn less from National Savings overall in return for the security it offers. The money is, of course, guaranteed by the Government. But the also guarantees the first £50,000 in any financial institution - which is more than you're allowed to invest in Premium Bonds.
The question you've put to us is roughly summarised like this - with such a low rate, what is the point of Premium Bonds?
We'll try to get you an answer at 1230 (or a time of your choosing on the ³ÉÈË¿ìÊÖ iPlayer).
But you might want to supply your own in the comments.
Comment number 1.
At 9th Dec 2008, Neal Gossage wrote:Whilst I have some sympathy with savers, demand needs to be 'encouraged' if we are to avoid a long and deep recession. Whether we like it or not, those with the most debt are the most economically active and therefore the reductions in interest rates seen in the last few weeks should help to stimulate demand. On the other hand fear of unemployment could counter the moves made by the Bank of England.......
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Comment number 2.
At 9th Dec 2008, n1 wrote:Anyone who invested in premium bonds for a steady return are in the wrong product and always have been. I don’t see the point in moaning that the return has reduced from 4% to just over 1%. The whole point of premium bonds is that you have the chance to win big. I doubt there are any bond holders out there who actually achieved the stated return many will have returned much less and there will be a few who got a much larger return.
I have some sympathy for those who suggest cutting down to a single 1m payout with the other million spread out over as more smaller wins, however it seems to me this is just another case of circumstances changing and people moaning about something they went into with their eyes fully open.
If we carry on like this we are in danger of proving the Aussies right, sadly we are getting more like whinging poms every day
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Comment number 3.
At 9th Dec 2008, babygeordielad wrote:50 quid will not buy me and my wife a decent meal.why not scrap the 50£ and one of the million£ prizes and put the money into the one hundred pot to make it worth while then more more satisfied punters
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Comment number 4.
At 10th Dec 2008, bbbhappychick wrote:I disapprove of the Govt's endless tinkering with the formula. We know from experience that when Gordon tinkers, Gordon takes.
Since we are lending money to the Govt, the effective interest rate should the greater of the BOE rate or the rate of real inflation (including housing, council tax, etc). As the value of total bonds varies, the total prize money will vary.
The odds of a win should be fixed and made public. The spread of prize values should be determined by an algorithm that maintains the odds of winning BUT is flexible enough to deal with marginal changes in total bond values.
Whilst the million pound jackpot will remain a big attraction to some, more lives may be transformed if 20 people won 50,000 quid or if 200 people won 5000 quid. The minimum win needs to be upgraded to 100 quid.
I don't have a vested interest as I've cashed in my bonds. Right now, the certainty of 1500 pa less in mortgage payments is more attractive than the possibility of a 1m windfall.
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Comment number 5.
At 10th Dec 2008, PetersKitchen wrote:This not new, the fund has always been adjusted either up or down.
The current adjustement reflects the real possibility of interest rates being cut to 0.8% in the very near future.
People will vote with holdings if they have a run of successive months without a payout (which will be the consequence of the recent cut) the Government will then lose more valuable savings at a time when they and we need to save the most.
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Comment number 6.
At 10th Dec 2008, Valleyblog wrote:With a fixed number of prizes the odds are obviously stacked in favour of wealthy people who can afford £30k in a non-interest bearing investment since the stats. show they can expect to win up to 8 prizes a year. Those of us of more modest means stand little chance although the scheme was meant to be for the ordinary person to invest a bit in the country and have a modest flutter. I know a family who between them have £120K of bonds and have won tens of thousands.
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Comment number 7.
At 13th Dec 2008, dennisjunior1 wrote:it may be the only thing left in the arsenal right now....
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