From: Ronald Raygun 
Subject: Re: Premium Bonds
Newsgroups: uk.finance
Date: Fri, 21 Jan 2005 17:50:37 GMT

LynLyn wrote:

> We have a relatively low income so cannot afford to take risks

This is important, and is a big reason why you should *not*
consider premium bonds.

> and as it is possible
> to cash in premium bonds whenever we like, with no loss of capital this
> seems like a good way of having a chance to win some cash while keeping
> our original stake safe.

The point about premium bonds is that they're a mug's game, like the
lottery, if you are hoping for big wins.  Big wins are so unlikely that
you may as well ignore the possibility for all practical purposes.
You have to go with averages, and they are that you should expect to win
£50 now and then, equivalent to an interest rate, tax-free, of very
much less than you would expect to "earn" (in terms of paying less)
by investing your £50pm in additional mortgage loan repayments.

On a low income you shouldn't be wasting your money like this.

On the point of your stake being safe, it's true that it's unlikely
the premium bond venture will go bust, but it could happen, e.g. by
some very clever fraud, or by the whole currency collapsing.  There
is no safer stake, though, than a debt paid off, so your money is
safer if you put it to reducing your loan.