# UK Premium Bonds



## Drapier (15 Jan 2007)

Is it Permissable for Residents of the ROI to invest in UK Premium Bonds on a regular basis?. IF yes are there an tax implications?


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## gipimann (15 Jan 2007)

According to the website www.nsandi.com overseas residents can purchase bonds - quote from their section on living abroad

"Overseas residents can hold and purchase Premium Bonds if local regulations permit though they cannot apply via our website as many countries prohibit the promotion of lotteries over the internet".

The site refers tax queries for non-UK residents to their local tax authority.


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## ClubMan (15 Jan 2007)

According to 


> By using this website, which is intended for residents of the UK, Channel Islands and Isle of Man only, you will be deemed to have confirmed that you are so resident.


 so I suspect not.

_Post crossed with gipimann's. _


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## gipimann (15 Jan 2007)

Clubman,
I saw that quote too, and assumed the same as yourself.  However it seems to mean that non-UK residents can't buy bonds using the website (online purchase), however they can buy them using good old-fashioned pen, paper and envelopes! (not to mention money!).   See the section "living abroad" available on a drop-down menu on the website.


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## DobermanElla (22 Aug 2008)

http://www.indymedia.ie/article/88600

Check out link for full story. Currently Irish residents are unable to purchase UK premium bonds, however as an Irish woman took a case to Europe, the Irish government is now being forced to amend legislation so that Irish residents can purchase premium bonds. This will happen late September 2008. The Irish government have also been informed that they must inform their British counterparts that the restriction on selling premium Bonds to Irish residents is to be lifted. And about time too. The Irish government has been arguing for years that by keeping the restriction in force they were protecting us, yea right!


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## Marc (22 Aug 2008)

DobermanElla said:


> http://www.indymedia.ie/article/88600
> 
> The Irish government has been arguing for years that by keeping the restriction in force they were protecting us, yea right!



Actually Premium bonds are a pretty  dreadful form  of investment  but  a better form of gambling than the lottery.


Premium Bonds are simply a savings account you can put money in (and take it out when you want), where the interest paid is decided by a monthly prize draw, where you can win between £50 and £1 million tax-free.

 The minimum holding is £100 (or £50 for monthly standing orders) and the maximum is £30,000. So put a grand in and you get 1,000 £1 Bonds, each is then individually entered into the prize draw. 

The bonds enter the prize draw one calendar month after purchase and continue until you cash them in, which can be any time, though it takes up to eight days to withdraw.



*The capital is very safe.* You don’t risk the money you put in, only what interest you’ll get, and Premium Bonds are operated by NS&I which, rather than being a bank, is backed by the Treasury.
*The winners are decided by random draw.* NS&I sexes-up the draw by the personification of the IT equipment, in other words, it calls it ERNIE (electronic random number indicator equipment); in reality it's a simple, audited, random number process where every Bond has an equal chance of winning no matter where or when it was bought.
*In a typical draw, each bond's chance of winning a million is 18 billion to 1.* Of 36 billion pounds in Premium Bonds, each month, there's around 1.7 million prizes given out of between £50 and £1 million each. Over 1.4 million of these are £50s, 190,000 are £100 and the remaining 8,000 or so are between £500 and a million (only two are £1 million though).
 *Are they worth investing in?*

 NS&I is government backed, and they help generate government funds and cash flow. Yet the payout is much worse than many believe.

*  You’re likely to win even less than the interest rate.*


 The value of prizes paid out is determined by an interest rate, which is currently 3.4%, though it's changed, usually following a change in Bank of England base rate. 

This means if you owned every Premium Bond in existence, the amount won over a year would be equal to 3.4% of what you put in. So very roughly, on average for every £100 put into Premium Bonds, you'd expect a £3.40 annual return.


Wrong! Because of the way the prizes are allocated, the majority of people will win much less than the interest rate. 
*
This means that, typically, they are worse than the top savings accounts. *


*Don’t think of it as ‘winning’*​
Your chance of winning the jackpot per £1 spent on the National lottery is one in 14 million, far out-stripping the *one in 18 billion* chance of becoming a millionaire through the Premium Bond draw.

 The fact the payouts are commonly referred to as a ‘win’ rather than an ‘interest payment’ is psychologically devious. 

Comments like, “my friend wins £50 every few months” mislead; on clinical evaluation, someone with £10,000 of Bonds should ‘win’ £340 a year; that’s roughly £50 every other month; yet the same cash in a savings account would ‘win’ over £50 every month or £650 a year.

 Worse still, compare the Premium Bond interest to retail price index inflation (RPI), which is significantly higher than the Premium Bond interest rate, so any cash you have in bonds is increasing more slowly than the prices of everyday goods. This means by holding bonds the real amount of money you have is decreasing in real terms. 

*The thing about averages*

Both Brian O'Driscoll and myself both have an average of 50 caps for Ireland. He has 100 and I don't have any.

Some people will win more than the average, not many, but a few.

 Put £100 in Premium Bonds, calculate the probability and 95% of people won't win a penny over a year, but one in 20 will win £50 or more! And if you're that lucky person, this is a great return. Yet the odds of winning big get very long.

Prize distribution

Sample of prizes in a typical monthly draw. This can and does change (for example sometimes there are extra £1 million prizes in promotional draws), but it's still relatively few and doesn't change the chance for most. 



*Prize Level/ **Odds of winning per £1 bond for a typical draw
* 
  £1 million/1 in 18,150,000,000   

£100,000  /1 in 4,542,000,000   

£50,000  / 1 in 2,137,000,000   

£25,000  /1 in 1,068,000,000   

£10,000  / 1 in 433,000,000   

£5,000  /1 in 217,600,000   

£1,000  / 1 in 17,647,000   

£500/1 in 5,882,000   

£100/1 in 191,700   

£50  / 1 in 24,997   

£0  /1 in 1.00004​
*
Why most people win less than the interest rate*

Even though Premium Bond rates stack up poorly compared to decent savings rates, even that’s still misleadingly generous; the real expected payout is much less, as it's massively skewed by the distribution of the prizes.

Premium Bonds say that the interest rate is 3.4%, so you'd expect to win £3.40 per £100. Yet of course this is impossible, there isn't a £3.40 prize; you can either win nothing, £50, or more than £50. The big jackpot prizes, won by a miniscule number of people, skew the payout average and make the interest rate look much more generous than it is.




*£100 over a year. *Put the minimum £100 in and the interest rate predicts a win of £3.40 over a year - yet that’s impossible as the smallest prize is £50. In fact 19 out of every 20 people with this amount won’t win a thing; leaving only one in 20 winning £50 or more.
*£1,000 over a year.* Put £1,000 in Premium Bonds over a year and while the interest rate predicts a £34 win, the majority of people (58%) still win nothing.
*£30,000 for a year.* Even if you put the biggest amount you're allowed to in Premium Bonds, your chance of winning the million in a year is still over 1 in 50,000.

Probability outcomes!

On the surface Premium Bonds don’t look to be complex. NS&I happily lists on its website enough data to allow anyone with a calculator to work out the chance of one bond winning a £50 prize over a month (1 in 22,000 by the way).

Yet to work out the chance of someone with five thousand bonds winning £500 or more includes countless variables. To win £500 in one go could be one £500 prize, or five £100 prizes, or ten £50 prizes; or a combination of them; yet to win more than £500 holds scores of variables. 

Plus of course, the draws are monthly, so if you’re calculating the assumed winnings over 5 years; it actually means you’re calculating the interaction of probabilities for over 60 draws to get the various answers. 


A Summary: The Results

Look at Premium Bonds with a clinical financial eye.

For those who like a flutter, as Premium Bonds do protect your cash in NOMINAL TERMS, it's fine to put a *non-significant* portion of your money in them, more for fun than for investment returns. 

Many people often think “I’m likely to get about 3.4% and there’s a small chance of winning a million”, the main point is this isn’t correct. You’re actually likely to get quite a lot less than 3.4% and there’s a negligible chance of winning a million.


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## jpd (23 Aug 2008)

I have held a premium bond since the late 1970s (I was living in London then) and have never won a prize!


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## DobermanElla (14 Nov 2008)

Irish law has now been changed so as to enable Irish residents to purchase British Premium Bonds. That said it's not easy, as last time I looked at the national savings website one could not use a credit card, so I guess this means a trip up north with a wad of cash. Anyway.. in principle one can purchase.


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## Ravima (30 Dec 2008)

Are you sure that Irish law is now changed, as I have been told by UK Premium Bond people that as a resident in ireland, I CANNOT purchase.


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## Ravima (8 Jan 2009)

UPDATE:


I have passed details of the relevant SI to UK authorities, who are looking into it and will come back to me when matter is clarified at their end.


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## mercman (8 Jan 2009)

On a slightly different note, on last night's BBC news, it mentioned that the prize fund for Premium Bonds was been drastically reduced.


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## Ravima (9 Jan 2009)

that would be because it is linked to interest rates.


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## mercman (11 Jan 2009)

Ravima said:


> that would be because it is linked to interest rates.



I am aware of that. Mentioned it in case of others that were not aware.


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## Ravima (21 Jan 2009)

We can NOW buy.

thanks to all for assistance.


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## NOAH (9 Feb 2009)

I had to change my address to  ireland just lately and they told me in a separate letter I could not buy any more bonds as I am deemed a resident of  the republic???

Have you better information?

noah


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## Ravima (9 Feb 2009)

SI 419/2008

Point it out to them and ask them to confirm that you are now eligible to purchase.


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## NOAH (18 Feb 2009)

SI 419/2008,  what is this and can you point me in the right direction please?

And thanks.

noah


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## Ravima (18 Feb 2009)

its the statutory insstrument signed by the minister, allowing you to buy them.


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## NOAH (18 Feb 2009)

thank you but where do i find it??  please, lost.


noah


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## Ravima (19 Feb 2009)

do a google ie search on it. 

write to them with application form saying that the law is now changed and you wish to purchase bonds.


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## Ravima (10 May 2009)

Alas, now that the battle for ROI residents to buy Premium Bonds was won, the local irish banks have stepped in to foil us yet again. They will NOT draw a sterling draft in favour of another financial institution - Nat Savings UK is a financial institution!!!


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## NOAH (19 May 2009)

Just an update to say I eventually got to buy some premium bonds so thanks to people on here.  There is a period of grace where you have to wiat until at least a full calendar month from the date of purchase before they are entered in the draws.

noah


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## Ravima (28 Nov 2010)

its a lottery, so winnings, are tax free, same as using an offshore bookie. interest accruing on the winnings once deposited in bank are taxable.


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