You must have missed the point I was making. Big prizes are won almost exclusively by people with large holdings. That is a fact. Most people do not have £50k sitting about. Most big prizes are won my a small demographic.
Where is the evidence of that?
I don’t dispute the fact that much of the fund is held by those with large holdings. I understand that 43% of the fund is held by those with the maximum £50k. This just means that about 43% of the meaningful prizes are won by those people. You seemed to be implying that they got a greater than pro rata share.
No, I was not implying that.
It’s simply probability. Someone with £50,000 is ten times more likely to win than someone with £5,000, so it makes sense that they will appear in the winners tables.
Yes, It used to be £30k, then £5k the £2k now £1k and maybe £500 next year!
So much for SME Private emterprise!
I hope I’ve your interpreted your comment correctly, as a numerical example can demonstrate the theme of ‘reduced yield’ quite easily e.g.
Say the monies ‘invested’ in the PB Fund overall is £1m with each entry of £1 – and yield is 5% i.e. £50k. Say the top prize is £5k.
So, the overall yield is 5% and the chances of winning are geared to the level of your holding, but after removing the big/larger winners, the yield falls i.e. £50k - £5k = £45k/Fund of £999,999 = say 4.5%. This ratchets down further as other larger prizes are declared.
So, while the headline opportunity to win remains geared to your level of holding, the prospective yield falls away sharply. Put another way, larger winners can suck up the headline yield.
That seems pretty good. Here in NZ you are taxed at your standard tax rate on any interest you earn, or any investments for that matter. It’s not very popular here either, especially for people on pensions who don’t have any other income. It effectively means you are taxed again on your savings having already been taxed on it when you earned the income. Off course, you then pay more tax on that income when you spend it.
There has been an unsuccessful campaign to change things so that interest is tax free up to the rate of inflation, so that pensioners aren’t paying tax simply to stay up with inflation. Actually, out tax bands also haven’t been adjusted for inflation, so we are all hit by tax creep as well.
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Same general picture in the UK, with the identifier of ‘unearned income’ being used in circles – have to stop here, as this will evolve in to p-word elements. Suffice to say, the use of debt needs much more careful consideration IMHO, and the global management of economies since the GFC has created a lot of faux wealth.
Every premium bond has the same chance of winning as every other one.
So if Mrs. X has £50k invested she will win on average exactly the same amount as 50 people with £1k invested each.
Who actually gets the money is random.
If a person doesn’t like a random element in the distribution they should invest elsewhere.
But it’s fair.
And it doesn’t favour the rich in any way.
A person with £50k invested can win zero and therefore loses a lot more compared to a savings bank account than a poor person with 1 premium bond.
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No, the headline rate is the correct average rate for all investors in premium bonds.
The average return is completely fair and equal for all investors.
Premium bonds are actually structured to discriminate against richer people who are limited to only being able to invest £50K whereas people with less than £50K to invest can invest as much as they like.
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Come again ?
If a person wants to invest £51K in premium bonds, they’re not allowed to do that.
Whereas someone with only £49K to invest can invest all that they wish to in premium bonds, which are run by an organisation owned by the UK government.
It’s no different to any other account limit. You are limited to £20,000 a year in an ISA. There is a savings account at Nationwide paying 8% with a limit of £200. None of these discriminate against anyone, they are simply limits.
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Respectfully, you’ve misunderstood the concept in play, which is the advertised yield on the PB fund, and how this breaks as a lower yield in the population given the weightings of the prizes within this distribution.
The way it’s done is shown here.
If you put £20,000 in a ISA and £50,000 in premium bonds that’s 70,000 tax free income of some sort.
Or rather it’s £70,000 of savings, earnings on which are tax free. You can then earn up to £1,000 of interest on other savings without paying tax.
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The 1 premium bond we have, has never won a prize in over 40 years.
My deceased mother in law had £5k worth and regularly got payouts, the last one just as she died.
Think we may just cash in the one and buy a Euro Millions ticket 
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Excluding prizes that are rather unlikely to be won does reduce the realistic expected yield. The complicated maths analysis by Martin Lewis and also the Wikipedia page only considers this aspect.
This yield is indeed lower for smaller holdings. This is because the financial value of winning a big prize is greater for smaller holdings. For example, someone with just £1 invested over a year could win £100 with a probability of 1 in 5,000 giving a 10,000% return but the most that someone with £100,000 invested can win is £1m with a lower probability of 1 in 50,000, which is “only” a 1,000% return.
The question is then how much value to give to the unlikely large prizes. Martin Lewis correctly debunks the false perception of “expect to get the headline rate plus there’s a chance of winning big”. The Wikipedia page incorrectly writes off big wins as negligible. The true position, at least mathematically, is that the value of realistic winnings plus the value of a big win adds up to the headline rate.
Of course, the perceived value of a big win will vary by individual based on their emotive feelings. Many will dismiss it entirely, yet at the other extreme some may dream big and be mentally spending their winnings. I take a more neutral position, based on the maths.
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