# State Saving Certificates



## Logo (30 Jan 2017)

Currently an investment of 25K with 5 year Savings Certificates gives an interest of €1,250. I'm just wondering if the interest rate rises during that five year period - will re-investment in the newer product to get the improved rate be required, or will the new rate be automatically applied to an existing account.

Thanks


----------



## Sarenco (30 Jan 2017)

No - the rate is fixed on purchase, it isn't a variable rate.


----------



## Logo (30 Jan 2017)

Appreciate the prompt reply.


----------



## Odea (17 Feb 2017)

The 5 year State Savings. Is this .98% per annum or .98% after 5 years? Thanks


----------



## dub_nerd (17 Feb 2017)

It is 0.98% AER (annual equivalent rate = compounded rate per annum). The AER is shown because it is mandatory to do so, but it is more correct to think of it as 5% total return after five years, especially as most of the return accrues in the last six months. You can take your money out any time but you will not get much of the return as it is on a sliding scale. Do not plan on getting your 0.98% per annum if you cash in before the five years is up.


----------



## Odea (17 Feb 2017)

Thanks dub nerd. I purchased a chunk of Prize Bonds today and I will stick some more in the 5 year State Savings.

My existing €100k of Prize Bonds has produced 44 x €50 wins in 18 months. I think there may be a few of the older €75 wins included. The bigger prizes have eluded me so far.


----------



## dub_nerd (18 Feb 2017)

That's a 2.2% return on the Prize Bonds in 18 months -- around double the expected average. Don't worry about the biggies. The small ones are your bread and butter.


----------



## xoxoxo (18 Feb 2017)

Wow - that's great return on your prize bonds. I would have a similar amount invested and have won  €50 X 7 and 1x€100 over the 18 months, so a return of 0.45% - not great. I did not have the full 100k invested for the full 18 months though so not a true reflection. Maybe I am just waiting for the €1m win


----------



## MrEarl (18 Feb 2017)

A 2.2% return on the prize bonds is probably a lot better than average (no matter what the people trying to sell them might tell us) - particularly given your capital is "risk free".



dub_nerd said:


> It is 0.98% AER (annual equivalent rate = compounded rate per annum). The AER is shown because it is mandatory to do so, but it is more correct to think of it as 5% total return after five years, especially as most of the return accrues in the last six months. You can take your money out any time but you will not get much of the return as it is on a sliding scale. Do not plan on getting your 0.98% per annum if you cash in before the five years is up.



Thats a vital point and actually something that justifies a revision in the way the AER's are presented tbh.... if a return is heavily weighted towards the back end of an investment period, it needs to be specifically called out so there's essentially a health warning right alongside the AER calculation.


----------



## knockshe (18 Feb 2017)

Odea, your prize bonds are doing well; I have €41k in prize bonds and have won 4x€50 in the past 12 months. Works out at 0.49%. I was certainly expecting a higher eturn so may pull out the funds soon if it doesn't improve.


----------



## Odea (18 Feb 2017)

I have some shares that are producing between 3% & 5% dividend yield. I was tormented to purchase some more of these. It is difficult not to be tempted. I decided to add to my Prize Bonds stash based on my previous wins. I can tell you if they don't perform I will sell them just as quickly. It is interesting, but it is the same batch of numbers that keep winning. Others...nothing.


----------



## Logo (18 Feb 2017)

Odea said:


> I have some shares that are producing between 3% & 5% dividend yield. I was tormented to purchase some more of these. It is difficult not to be tempted. I decided to add to my Prize Bonds stash based on my previous wins. I can tell you if they don't perform I will sell them just as quickly. It is interesting, but it is the same batch of numbers that keep winning. Others...nothing.


I'd agree that share dividends are fairly decent at the moment but stocks appear to be higher now than ever. Not sure if it's The Donald affect or Brexit but it could be a bumpy ride... Meanwhile I'm playing it safer and purchased some prize bonds recently (even though I haven't had too much luck in the past). I've followed prize bond threads on AAM and Boards.ie over a number of years but yet to read an account of anyone winning more than €100


----------



## MrEarl (20 Feb 2017)

Ultimately, prize bond returns are down to luck and nothing more... 

I unfortunitely don't tend to be very lucky so I don't see myself putting much into prize bonds anytime soon.


----------



## dub_nerd (22 Feb 2017)

Odea said:


> It is interesting, but it is the same batch of numbers that keep winning. Others...nothing.



Have heard that said many times, but never seen any proof. Usually turns out the batches are vastly different sizes, or tracked over an unrepresentative period, or the owner is suffering from a confirmation bias.



Logo said:


> I've followed prize bond threads on AAM and Boards.ie over a number of years but yet to read an account of anyone winning more than €100



There's a prize bonds thread on here where a poster won €1,000 



MrEarl said:


> Ultimately, prize bond returns are down to luck and nothing more...



While that is true, any game of chance will produce a statistical outcome determined by the arithmetic of the game. If you play long or often enough it is a practical certainty that the average outcome will be achieved. This is the so-called "law of large numbers". With prize bonds it is a matter of investing a sufficient amount for the average to be achieved within a short time horizon. With a single prize bond there is essentially no chance of this occurring, with €100k+ there is a very good chance of achieving the typical return (currently 0.8% tax free) over the course of a year. Many people seem completely unable to grasp this -- they get indignant at the thought that their couple of mouldy old bonds sitting in a shoebox for years have less chance of winning than someone else's freshly minted €100k worth, and believe nutty conspiracy theories about "only newer bonds winning".


----------



## MrEarl (22 Feb 2017)

dub_nerd said:


> ....While that is true, any game of chance will produce a statistical outcome determined by the arithmetic of the game. If you play long or often enough it is a practical certainty that the average outcome will be achieved. This is the so-called "law of large numbers". With prize bonds it is a matter of investing a sufficient amount for the average to be achieved within a short time horizon. With a single prize bond there is essentially no chance of this occurring, with €100k+ there is a very good chance of achieving the typical return (currently 0.8% tax free) over the course of a year. Many people seem completely unable to grasp this -- they get indignant at the thought that their couple of mouldy old bonds sitting in a shoebox for years have less chance of winning than someone else's freshly minted €100k worth, and believe nutty conspiracy theories about "only newer bonds winning".



I do not beleive in such things as new bonds win while old bonds do not and such nonsense, but appreciate that some people actually do seem to believe such things.

The majority of Irish individuals have sufficient cash to buy prize bonds, so as to achive the average in a relatively short horizon as you propose (even €100k over 1 year would not be anywhere near enough to get the average return, imho).  Remember, the financial amount invested in prize bonds and the fact that this number continues to grow, particularly in these times of low deposit returns etc.  As such, I refer to my original comment - the returns are down to luck and nothing more (well, for the majority of "ordinary" people over reasonable time horizons).

Were it not for the fact that your capital investment is protected and can be returned to you at a later date, it would be right up there with playing poker for the majority of people, as I see it


----------



## dub_nerd (22 Feb 2017)

MrEarl said:


> The majority of Irish individuals have sufficient cash to buy prize bonds, so as to achive the average in a relatively short horizon as you propose (even €100k over 1 year would not be anywhere near enough to get the average return, imho).



I suspect you mean the majority "do _not_ have" sufficient cash. That's true. But €100k is certainly enough according to my modelling, which you can see somewhere in the first dozen pages of this AAM thread (sorry, didn't have time to be more specific):

http://www.askaboutmoney.com/thread...g-attractive-alternatives-to-deposits.182819/




MrEarl said:


> Remember, the financial amount invested in prize bonds and the fact that this number continues to grow, particularly in these times of low deposit returns etc.  As such, I refer to my original comment - the returns are down to luck and nothing more...



Actually, the fixed amount invested is _good_ news for the return. A fixed amount is paid out in higher value prizes and a variable number of €50 prizes is then paid to make the total up to the mandated percentage payout. Basically, the bigger the total fund, the higher the relative proportion of prize money paid in €50 prizes. Since those are the only ones that are important to achieving the average payout, your returns get smoother as the fund gets bigger.



MrEarl said:


> Were it not for the fact that your capital investment is protected and can be returned to you at a later date, it would be right up there with playing poker for the majority of people, as I see it



For small investments, that's true.


----------



## MrEarl (23 Feb 2017)

dub_nerd said:


> I suspect you mean the majority "do _not_ have" sufficient cash.



Yes - sorry


----------



## Eddie Peters (23 Feb 2017)

dub_nerd said:


> Actually, the fixed amount invested is _good_ news for the return...
> For small investments, that's true.



Is it  possible to change from prize bonds to state savings without needing to produce duplicate documents i.e. withdrawal requests, filling new application forms and producing ident documents etc. when the applicant has already proved all requirements with NTMA.


----------



## dub_nerd (24 Feb 2017)

As far as I know, one hand doesn't know what the other is doing. FEXCO do the Prize Bonds, there's some sort of Mickey Mouse ID card for the National Solidarity Bonds, and the others are separate. So unless something has changed in the last couple of year, it's still a separate  job each time, which is a pain. Someone correct me if I'm wrong.


----------



## Laramie (24 Feb 2017)

There is even confusion in different Post Offices. I wanted to purchase some 5 year Bonds in a Post Office but I was refused because I had no I.D. re money laundering. When I pointed out that I already held other accounts the unhelpful lady in the Post Office insisted that I did need to produce I.D. every time. I pointed out to her that I had my account number on the form. No use.
I ended up going to a nearby Post Office where they were accepted. I contacted An Post and I was told that the person in the first Post Office should have accepted them.  Now I just post them direct.


----------



## Duke of Marmalade (6 Apr 2017)

MrEarl said:


> Ultimately, prize bond returns are down to luck and nothing more...
> 
> I unfortunitely don't tend to be very lucky so I don't see myself putting much into prize bonds anytime soon.


Just stumbled on this thread.  Can I suggest that _dub___nerds_ excellent post from a previous thread is promoted to Key Post status.  This is by way of update.   I will work with 100k.  Assuming all prizes are €50 the annual expected return is 0.60% i.e. 12 wins.  So taking Rabo 90 day deposit just for argument I only need to win 5 times in a year to beat that.  Using the Poisson distribution (which is a perfectly acceptable approx for the binomial here) I reckon the chances of not beating that are less than 1%.

I agree that 10k Prize Bonds should not be compared with bank deposits.  But these days we are talking about interest amounting to the cost of one lotto ticket per month and Prize Bonds are far better than lotto tickets in terms of windfall payout ratio.

In summary, for large amounts use Prize Bonds as alternative to bank deposits and for small amounts use them as alternative to the Lotto


----------



## dub_nerd (6 Apr 2017)

Duke of Marmalade said:


> Can I suggest that _dub___nerds_ excellent post from a previous thread is promoted to Key Post status.


Actually, I'd like to suggest that _dub_nerd_ gets sent to the dunce's corner! 



Duke of Marmalade said:


> Using the Poisson distribution (which is a perfectly acceptable approx for the binomial here) I reckon the chances ...


The Poisson distribution just reproduced all my carefully calculated discrete odds to four decimal places! Looks like my efforts were a bit misdirected. 

But thanks for the enlightenment anyway!


----------



## Duke of Marmalade (6 Apr 2017)

dub_nerd said:


> Actually, I'd like to suggest that _dub_nerd_ gets sent to the dunce's corner!


I don't know why you are beating yourself up. Your original post is a classic.


----------



## dub_nerd (6 Apr 2017)

Duke of Marmalade said:


> I don't know why you are beating yourself up. Your original post is a classic.


You mean this one. Yeah, I'm just embarrassed how much work it took to produce those graphs when your Poisson distribution does it perfectly well.

EDIT: on the up side, I can finally produce a Google Sheet that let's people do the calculation for themselves. My original method involved factorials too large for any spreadsheet.


----------



## Duke of Marmalade (7 Apr 2017)

dub_nerd said:


> You mean this one. Yeah, I'm just embarrassed how much work it took to produce those graphs when your Poisson distribution does it perfectly well.
> 
> EDIT: on the up side, I can finally produce a Google Sheet that let's people do the calculation for themselves. My original method involved factorials too large for any spreadsheet.


Yep, that's the one. Posting an online link using 300,000! could crash the World Wide Web. 

Are you saying you can now post a Poisson friendly tool?  That certainly merits a Key Post.


----------



## Duke of Marmalade (7 Apr 2017)

Here is a .

In the box named x enter your target number of €50 wins in a year and in the box named average rate of success enter the average number of Prize Bonds i.e. currently .60% of your investment amount divided by €50 or more simply 12 per €100,000.

The respective figures for 100k are x = 5 to beat Rabo 90 day notice saver and 12 for average number of Prize bonds.  For other sums simply pro rata these numbers e.g. 500k (max joint holding) enter 25 (or whatever your target) and 60.

Notes: multiply the probabilities by 100 to get percentages. X must be a whole number (you can't half win) but average rate of success can be any number.

(_Apologies if any French slips into the above link, I am doing this in the South of France_)


----------



## dub_nerd (7 Apr 2017)

Duke of Marmalade said:


> Posting an online link using 300,000! could crash the World Wide Web.


Excel and Google Sheets both croak above 170! 



Duke of Marmalade said:


> Are you saying you can now post a Poisson friendly tool?



Here's a first cut. Click tabs along the top for graphs. Any suggestions for improvement?

(P.S. Now that I recall, I did know the Prize Bond return was _shaped like_ a Poisson distribution ... I've no idea why I didn't cop that it could actually be computed that way: http://www.askaboutmoney.com/thread...atives-to-deposits.182819/page-8#post-1386534).
(P.P.S. Pity I'm figuring it out just as the return from Prize Bonds hits a level where it's hardly worth the hassle to invest).


----------



## Duke of Marmalade (8 Apr 2017)

Good stuff _dubnerd_.  Possibly higher sums in multiples of 100k up to the max of 500k could replace the smaller sums for which we agree it is not an alternative to deposits. However the range of outcomes increases proportionately and so hard to fit on one graph.  An alternative is to show the 1, 5, 10, 25, 50, 75, 90, 95, 99 centiles.

I know it sounds ridiculous to talk of half a million in PB but it does beat deposits hands down.  Also IMHO it is safer than deposits (I have argued that the 11bn or so of State savings are the last to be welched on if it ever comes to that).

Your data is in tabular form, I have supplied a calculator for individual sums, albeit it needs a bit more effort by the user.


----------



## dub_nerd (8 Apr 2017)

Finally! Just found the piece of the puzzle I'd been missing ... the Poisson Limit Theorem.
(And I _get it_, so maybe exiting the dunce's corner )


----------



## Duke of Marmalade (8 Apr 2017)

dub_nerd said:


> Finally! Just found the piece of the puzzle I'd been missing ... the Poisson Limit Theorem.
> (And I _get it_, so maybe exiting the dunce's corner )


As an actuary the duke is well used to using Poisson for example in modelling mortality outcomes


----------



## dub_nerd (9 Apr 2017)

Duke of Marmalade said:


> Your data is in tabular form, I have supplied a calculator for individual sums, albeit it needs a bit more effort by the user.


Ok, try this one for size. Enter a new value in the investment amount cell. May take a couple of seconds for the chart to be re-centred to show columns with values > 0.1%. Anyone can edit, so it may behave a bit strangely if multiple people do it at the same time.


----------



## Duke of Marmalade (9 Apr 2017)

Excellent, and I now have Google sheets on my iPad
The graph for 500000 looks like the half skeleton of a fish which in French is poisson, just saying

Users should note that in effect the input units should be thought of as €-years.  Thus 100000 can be thought of as 100k for 1 year or, for example, 20k for 5 years.  This is not an entirely trivial observation. 
The graph of 20k for 5 years is tighter in shape than 20k for 1 year, albeit the centre of gravity adjusts proportionately.


----------



## Ger1234 (11 Apr 2017)

Prize Bonds are an integral part of the wider range of NTMA State Savings products offered to personal savers by the National Treasury Management Agency (NTMA). When you save with NTMA State Savings products you are placing your money directly with the Irish Government.  State Savings forms part of the sovereign debt of Ireland which is managed by the  NTMA. The repayment of all NTMA State Savings money is a direct, unconditional obligation of the Government.


----------



## Logo (21 Apr 2017)

Bank deposit rates are at an all time low. State saving products are a bit more attractive - but why have state savings been allowed to be more competitive than banks?


----------



## Lightning (25 Apr 2017)

Good question. The NTMA State Savings instant access product is not highly competitive but getting there! The 4 year, 5 year and 10 year products are market leading rates and the 3 year rate is highly competitive. The NTMA say they set rates based on sovereign yields and deposit rates. However, the NTMA do not frequently review their rates. 

Banks have every right to be livid about the NTMA State Savings rates and banks have canvased the government on this before. The 4 year, 5 year and 10 year products are priced above deposit market price and offer a state guarantee.  

Surely it will not be long before the NTMA reviews rates once again?


----------

