Premium bonds – do you feel lucky punk?

Dominic Thomas
March 2025 • 2 min read

Premium bonds – do you feel lucky punk?

You may remember the character portrayed by Clint Eastwood – Harry Callahan – aka Dirty Harry, who regularly had shoot outs with villains. As he faced them after a shootout and everyone had lost count of the number of bullets that had been fired, he aims his magnum 44 pistol and utters the words “do you feel lucky punk?”. Such was the ‘enlightened policing’ of the 1960s and 1970s …

Like many of you, I have a bit of a soft spot for premium bonds. There is something nostalgic about them; they feel safe (you are essentially depositing money with the UK Government). You have a bit of a monthly gamble, which unlike other forms of gambling, you do not lose your money if you don’t pick the winner (or place). The winnings are also tax-free and frankly who wouldn’t want to win a million British pounds? Besides, a Premium Bond is only £1 – and you can have up to 50,000 of them.

But let’s be honest with ourselves.

There are around 129 billion bonds in the draw each month. Two will win the £1m jackpot. Your chance of holding the winning bond is 1 in 64 billion.

There are a total of 5,902,600 prizes or winners each month. The chance of winning any sum from the smallest of £25 to £1m is 0.004%. Whilst that looks like a lot of winners (nearly six million) the vast majority (98.77%) win £100 or less. There are only 20,371 that win £1,000 or more.

As most people won’t win, they tend to get out of the habit of checking. At the last time of checking since October 2024, there are unclaimed prizes to the tune of more than £92m.

Yes you get to stay in the monthly draw, but chances do not improve unless you hold more than £24,500 of premium bonds; as the chance of winning any prize is 24,500:1 – in other words £25 winnings for £24,500 – each month – so expected winnings of £300 a year or 1.2%. This is not exactly an inflation-beating rate.

The annual prize rate is 1.4% – that’s the total amount of prizes paid in a year across all the deposits. So if inflation is at 3% or more in the real world, then you are going backwards, more so if you hold less than £24,500.

Meanwhile – deposit rates can be achieved of 3-4% without too much fuss at the moment (March 2025).

Do you feel that lucky? 1 in 64 billion lucky? – they haven’t even inflated the £1m winnings. Perhaps like Harry Callahan, you may not really know why you keep “doing it”, but it certainly isn’t about the interest.

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Premium bonds – do you feel lucky punk?Jemima Thomas2025-03-14T16:16:13+00:00

Geopolitics and Market Volatility

Matt Loadwick
Feb 2025 • 3 min read

Geopolitics and Market Volatility

The stability, or otherwise, and volatility of global stock markets can be affected by a number of factors, which can be both economic and political in nature. In terms of economic factors, both UK and US economies are currently experiencing well-documented inflation, the result of rising costs of goods and services. This leads to increased borrowing costs, and to market uncertainty, as investors get spooked by high costs, and have a tendency to wait for prices to drop before investing.

In the UK, a glimmer of light appeared when the rate of inflation dropped by 0.1% in December compared to November, easing the pressure on Chancellor Rachel Reeves, and going some way to improve market confidence as the odds increase of the Bank of England reducing interest rates early this year. That said, it does feel like the current news cycle in the UK will provide reasons to be cheerful one day, followed by reasons to despair on the following, fuelling further volatility as markets react.

Global stock markets are also influenced by geopolitical events, where often the unpredictability surrounding such events can lead to increased volatility. As an example, the Russian invasion of Ukraine resulted in firms that had strong ties to Russia experiencing a significant fall in share prices.

It is also worth pointing out that politics and economics clearly do not exist in a vacuum, with both influencing each other symbiotically – as politicians drive their economic agenda, markets respond accordingly depending on the success (or otherwise) of their policies …

As the 47^th President of the United States was sworn in for the second time earlier in January, the world is braced for increasing geopolitical uncertainty with a Trump administration once again at the helm. Indeed, they have taken little time to give us a taste of what is to come over the next four years, creating headlines through divisive policies, such as the proposed mass deportations of illegal immigrants, withdrawal from the Paris climate agreement (compounded by plans to increase drilling for oil to promote as a key US export), pardoning the circa 1,500 Trump supporters who were charged over the 2021 US Capitol riots, and far-fetched rumours (we hope) of an interest in invading Greenland.

Such examples certainly give the impression that this administration may cause something of ‘a bumpy ride’ for markets in the coming years, particularly in the context of ongoing conflicts in the Middle-East and Ukraine. This is reflected in research undertaken by Scottish Widows, which suggests that geopolitics and volatility are likely to be among the top concerns for advisers in 2025.

If at some point you were to watch the value of your investments take a temporary drop, it is only human nature to feel a sense of nervousness. In the face of this expected volatility, we at Solomon’s are here as ever to encourage calm, and to ensure that our clients do not lose sight of the importance of planning for the long term.

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Geopolitics and Market VolatilityJemima Thomas2025-02-10T10:02:08+00:00

The Rising

Dominic Thomas
October 2023 • 3 min read

The rising

We have all been aware that prices have been rising, some rather more than the officially stated rate of inflation (are they kidding?). You are equally likely to be aware that interest rates on cash deposits have been slowly creeping up, reflecting the Bank of England lending rates. Most of the Banks and Building Societies were shamed into increasing rates by the regulator, the financial cartel has slowly limped to improvement in their offerings. At the time of writing, global equity markets are up about 7.28% over 12 months or 9.96% since the start of 2023.

This has also meant an increase in annuity rates, which are a fair bit higher than 12 months ago. Annuity rates are based on life expectancy and economic conditions, notably interest rates. For example, over the last year, according to Standard Life, annuities are up about 20%. However a little warning about the statement, there is a sense of ‘if only’ about these sorts of things…

If you were quoted for an annuity last year at age 65 (for example) you would be 66 now. As a result your annuity quote would be more anyway due to the fact that you are a year older. The older you are the better the deal, because it’s about your life expectancy (how much is left of it).

If you had bought an annuity last year at the prevailing rates, you may be a little miffed, as most of them do not increase with inflation each year. In simple terms you use a pension fund (usually) to buy a fixed income for life. This is either just in your name or with a spouse benefit (the income will continue at the same level or a lower amount each year). When the annuitant dies, generally the annuity stops, unless there is a spouse benefit or a special guarantee has been bought (so would pay the estate). You can certainly have an increasing annuity, but normally at fixed terms of 3% or 5% at the most. However these are costly and tend to be much lower, typically taking 12 years to catch up before actually paying more each month than a level annuity.

Let’s suppose you have £100,000 and are 65 – a single life, level annuity would provide about £7,462 a year (roughly). If you had been born a year earlier and turned 65 in 2022, you would have an annuity paying around £6,218 a year. This is nothing to do with investments performance, but everything to do with interest rates. Over time, that difference becomes more significant the longer you live.

The other odd thing about annuities is that if you are not in great medical shape, you may well qualify for an enhanced annuity, perhaps 30%-40% more. This is due to the expectation that your life will be shorter than average.

So had you waited you would be able to get a bigger annuity, if your health had worsened you would have a better annuity, if your spouse had died, you would get a better annuity. All pretty grim really. These are all things that we cannot predict, other than that you age. It’s also why we ask you about your health and plans. These are not insignificant issues. Let’s talk about them.

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The RisingJemima Thomas2025-01-21T15:49:31+00:00

How long are you investing?

Dominic Thomas
Feb 2023 • 8 min read

How long are you really investing?

As you know, we use a risk profiling tool, indeed if you have been a client for some years you will know that these have evolved over time. These all tend to test how you feel about investment loss. It’s a bit like throwing a snake into someone’s lap and asking them how they feel about snakes.

In all my time as an adviser I have never met anyone that likes to see the value of their investments reduce. Yet of course they do from time to time – and time is the key word, or perhaps concept.

Investment returns come from companies providing “solutions” to society at large. This results in products and services being sold for a profit and investors in those companies share the rewards of the endeavour. Wherever you are now, take a moment to consider all the things in front of you, to your left and right, including your attire, and perhaps the medication and food you have already ingested today. It’s made, but almost none of it is made by you.

Risky business?

Almost all investment theory works on the assumption that whatever can reduce in value the most is more “risky”. Cash tends not to reduce in value much, except for the impact of inflation or the bank failing. Shares can alter in price dramatically in the course of a few hours. So to simplify, shares are classified as high risk and cash low risk, with Bonds (and there are numerous types) classified as a little higher risk than cash as they provide return of capital and fixed income, much like cash.

Getting the balance between how much you should hold in cash, bonds and shares will dictate your returns (we call this asset allocation). How long you invest for is also a key part of the results. Unfortunately we live in a world obsessed with the short-term and immediate, yet you will almost certainly be investing for the remainder of your life, which I hope is a rather long time.

The interactive chart below shows 1 year returns, 5, 10 and 20 year returns with increased allocation towards shares from Bonds. In this instance the chart uses purely UK data for UK shares and UK Bonds, our portfolios are actually global, but this will hopefully provide some help with long-term thinking and what “risk” really is.

Figures reflect back-tested data for the period 1926-2020. In cases where the minimum return is a positive number, the red bar still portrays the min return but with a positive percentage.

You can draw your own conclusions, using the intelligence bestowed upon you, or you can listen to the the latest ideas about what will happen in the next 12 months, I would advise and suggest taking a much longer-term approach. For the record, the UK stock market is only about 5%-7% of the world stock market, depending on the value of the pound, which is why our clients invest globally.

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How long are you investing?Jemima Thomas2025-01-27T16:24:51+00:00

If Carlsberg made politicians

… they wouldn’t look much like the current bunch. As I write, it’s Monday morning, a new day, new week, new Chancellor and the continued conversation around whether the current Prime Minister is (or ever was) fit for purpose. The new Chancellor was handed the ultimate hospital pass and elected to pretty much shred his predecessor’s “mini budget”. Most people have an opinion on this and I’m going to make the wild assumption that you will have yours already.

So what has changed? The underlying problems that all countries have is income versus spending, this sounds familiar to anyone who has a financial plan. The only real difference is that a country doesn’t have an expiry date … at least in the normal course of life, and barring the ultimate catastrophe, we expect our nation to continue into the future, well beyond ourselves. As a result, money needs to last and debts ultimately need to be repaid or at least sustained.

So where are we in terms of your tax … essentially where we were a few months ago. Some rising taxes (full details yet to be released) and rising inflation, though hopefully this will begin to abate due to the recent interest rate rises, but we aren’t through the woods yet.

The supply chain problems caused by Brexit, the pandemic and a war in Ukraine have all pushed prices up and delayed delivery of many goods. The knock-on effects are significant and particularly to Britain, who deliberately decided to end global trade agreements and still do not have one with the United States.

Price rises lead to pressure on personal spending, savings levels tend to fall (hence interest rates are increased to encourage saving and reduce spending). Businesses face a cycle of holding off rises whilst trying to remain competitive but facing serious challenges on most fronts, from the very basic ‘heating the building’ to agreeing international contracts where the pound is ‘precarious’. We have been here before and there are always casualties. What has vexed (and angered) markets recently in particular has been the unwillingness to state assumptions in the plan.

Your financial plan always needs to be adaptable. We review this together every year. Perhaps some changes need to be made, but remember that your portfolio is global and not UK centric. The UK stock market is about 6% of the global market. So, let’s keep things in proportion. The problems are not unique to the UK (except Brexit). Facing problems is always better than ignoring them.

It would seem likely that 2022 will be one of those negative years for markets. The brave see this as an opportunity to buy cheaply; the nervous panic and sell. Those with a long-term mindset know this truth but how it is felt is always a challenge to our nervous system. Those with the best financial planning are those that adapt in the short term but stick to the long-term plan, for probably the best planning in the world …

You can read more articles about Pensions, Wealth Management, Retirement, Investments, Financial Planning and Estate Planning on my blog which gets updated every week. If you would like to talk to me about your personal wealth planning and how we can make you stay wealthier for longer then please get in touch by calling 08000 736 273 or email info@solomonsifa.co.uk

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If Carlsberg made politiciansJemima Thomas2025-01-28T10:05:26+00:00

Wishes, forecasts & worries

Here is another great piece I came across by David Booth, Founder of Dimensional Investors. David is one of the genuine sage’s of investing and I have great respect for him and his business. So I thought I’d share this piece which is timely.

When I was growing up, our local newspaper, the Kansas City Star, was full of news and had one page for opinion. After decades of cable news and nonstop digital postings, I see more opinions these days than news. That’s not a bad thing. But when it comes to investing, it’s crucial to remember the difference between news and opinion, and how they are sometimes used to forecast the future.

Any time the government releases new data on unemployment or inflation or interest rate changes, people start claiming they can forecast the future. That’s not necessarily a bad thing either. But most of what I hear people say isn’t what I would call “forecasting.”

Forecasting is when you have a high degree of confidence in an outcome based on well-proven models. The weather forecast for a few days from now is a lot better than anything I read in the Kansas City Star about investing. The weather forecast is pretty darn accurate. I’d sure call that kind of forecast the right use of the word. That’s different from someone issuing a “forecast” for when the Dow will hit a certain number. Or when inflation will reach a certain level. Or which five stocks will rise the most over the next year.

So when people say they forecast that something will be at this level at that time, I don’t call that a forecast.

That’s a wish.

And when people forecast that something will go down at a certain time?

That’s a worry.

DON’T BASE YOUR PLAN ON WISHFUL THINKING

Do you really want to invest your hard-earned savings—the money you’ll need for your kids’ college or your own retirement—based on someone’s hunch or wish?

The good news is you can have a good experience without having to do any forecasting—I believe you just need to be a long-term investor with a truly diversified portfolio.

Over the last 100 years or so, the average return of the market has been about 10% a year.1 I won’t call it a forecast, but my best guess is that over the next 100 years the average annual return will be about 10%. Of course, there may be large fluctuations, just like we have experienced for the last 100 years (and like we have experienced in the last six months).

Instead of forecasting, focus on the power of what I think has been behind the stock returns of the last 100 years: human ingenuity. Millions of people at thousands of companies working to improve their product, enhance their service, and lower their costs—and all adapting in real time to a changing world. We witnessed the power of human ingenuity over the course of the pandemic. I’m seeing it again as companies adjust to deal with inflation.

The world has changed in so many ways since I was a kid reading the Kansas City Star. I still occasionally read it on my phone now. (It makes me chuckle when I imagine trying to explain to my grandparents that I read the newspaper on the phone.) While I expect the world to keep changing—I’m not forecasting when or how—I am confident that human ingenuity will be a constant. Whether in good times or bad, that’s reason to be optimistic.

DAVID BOOTH

DIMENSIONAL Executive Chairman and Founder

Footnotes

1 In US dollars. S&P 500 Index annual returns 1926–2021. S&P data © 2022 S&P Dow Jones Indices LLC, a division of S&P Global. All rights reserved. Indices are not available for direct investment, therefore their performance does not reflect the expenses associated with the management of an actual portfolio.

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Wishes, forecasts & worriesDominic2023-12-01T12:12:44+00:00

INFLATION, INTEREST – THE NUMBERS ARE STARTING TO HURT

TODAY’S BLOG

THE NUMBERS ARE STARTING TO HURT…

If you are a car driver as I know most of you are, the current price of petrol will almost certainly have caused a gulp of disbelief as you fill up your “pride and joy”. The rate of inflation may be a testing 9% or 10% (next release from the ONS is next week) but the price of fuel is rising much faster than that. Indeed, I have noticed the price at a station change within the space of a return trip to a local garden centre.

Today, 16th June 2022 unleaded petrol is around £1.87 a litre or £1.93 for diesel. In June 2020 it was £1.07 and £1.11 respectively. That’s an increase of 74% in a year. If only I could tell you that investments had fared as well, they haven’t. Markets have been very difficult lately, largely since November. Global equities are down 1.48% over 12 months and global bonds are down 12.01%. When the numbers go in opposite directions to our daily reality of the cost of living it becomes alarming.

I am not going to pretend to you that this is easy or that inflation will quickly disappear as the Bank of England appears to believe (returning to around 2.4% in 2024). We could be in for inflation that lasts rather longer than that. Sadly, we are in short supply of good politicians around the world, those that we have seem intent on destroying any sense of self-respect. The “unexpected” war in Ukraine is certainly lasting longer than most expected… which does leave me wondering, who on earth is doing this “expecting”? most of the hard-nosed realists I know do not have much faith in politicians to resolve much at all, other than their own salaries and second jobs.

THE JUBILEE, 1977 AND A 67% MARKET DECLINE

If the Jubilee parties didn’t remind you of 1977, the impending rail strikes and some of the economic data may soon help you to do so. Still, we have learned lessons from the past haven’t we! I imagine that you appreciate that I am being a little sarcastic. Sadly, you and I cannot control very much of what is going on. We can control how we respond. All the lessons of history are that successful investing means riding out the peaks and troughs of the global market cycles. Some of these are very deep and “hurt”. For some context, the average bear market since 1926 fell by -35% and lasted 18 months. Some were worse, some better (hence average). The worst fall was in June 1972, markets collapsed -67% and the bear market lasted 2 years 7 months. £100,000 in 1972 would have fallen to around £33,000 however for those that held their nerve that same £100,000 became £1,207,159 when considered over 154 months (12 years 10 months). That is amazing isn’t it… but so few investors had the patience, confidence or perhaps ability to stay the course. This is not easy, hindsight is easy, the present and an unknown future are “difficult” yet that is the reality of our daily lives. Complex, unknown and full of conflicting messages and competing media.

Today the Bank of England raised its base rate to 1.25%. Let me get ahead of the “news services” and spin this in different ways. Interest rates have increased 25% overnight. The highest for over a decade. This is true, but in the context of interest rates they are half as much as they were in November 2008 (3%). When I started the firm in 1999, rates were 5% (some 333% higher). When I started in this game, they were 10.88% and I have a very real experience of them at 14.88%.

Life changes, your plans may need updating, but your main priorities and principles are unlikely to alter at all. Do get in touch with me if you are concerned. As I may have said, investing is a long-term, a lifelong process. Remember your money should serve you, not the other way around.

Dominic Thomas
Solomons IFA

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INFLATION, INTEREST – THE NUMBERS ARE STARTING TO HURTDominic2023-12-01T12:12:49+00:00

STATE PENSION INCREASE

TODAY’S BLOG

STATE PENSION INFLATION INCREASE

You will have noticed the impact of inflation on various goods and services that you have bought lately. Inflation always hits those on a fixed income harder. That mainly means those that are drawing their pensions.

The ONS publish data about inflation every month, but I suspect your actual lived experience of inflation may differ from the general averages for the entire country. There has been much coverage of this in the news, in particular the real inflation on supermarket products.

You can check the official current rate of inflation here (click here)…. Or you could look at your utility bills.

Retirees in Britain face the worst disparity in their state pension payments when set against inflation since the triple lock was introduced over a decade ago, findings warn. In April 2022, state pension pay-outs will rise by 3.1%, and be based on Consumer Price Index figure from last September. But earlier in the month, new official figures revealed that inflation was running at 5.5% in the year to January.

Pensioners would currently see a real term loss of 2.4% in the amount of state pension income they receive from the Government, and the problem could worsen with forecasts of inflation peaking at around 7.25% in April, according to experts at Quilter.

The basic state pension will rise by £4.25 to £141.85 per week, or around £7,370 a year, in April. The full flat rate will rise by £5.55 to £185.15 per week, or around £9,630 a year. Since the triple lock was launched in 2010, there have only been 22 months when inflation stood above the uprating of the state pension for the previous April and five of those months were in 2021, says analysis by Quilter. The previous biggest disparity was 0.6% back in November 2017, when inflation ran higher than the state pension uprating for 11 months, but only on average creating a disparity of 0.4% over the period.

I have no wish to get political, but I would add that this is a difficult situation for any Government. The number of people claiming the State pension is rising and there are fewer “working” people (paying NI) to cover the cost. This is, to be blunt a timebomb. The State Pension is a political punchbag, in theory paid for by the combined employer/employee or self employed National Insurance contributions.

See the links below (for those not yet drawing a State Pension).

Remember that the State Pension is income and taxable, it is simply that for most people it is within the personal allowance for the tax year (the 0% allowance). The personal allowance for 2022/23 remains at £12,570.

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STATE PENSION INCREASEDominic2023-12-01T12:12:53+00:00

ARE YOU MISUSING YOUR CASH ISA?

TODAY’S BLOG

ARE YOU MISUSING YOUR CASH ISA?

You may have gathered that I am not a fan of the Cash ISA. If you really must have one, then you need to be clear that you are getting a top rate of interest (less than 1% at the moment) and that you are not locked in for too long. If you expect rates to rise, why on earth would you lock in to one?

We all have a personal savings allowance. That’s £1000, £500 or nothing depending on your highest rate of tax. Basic rate (20%) taxpayers have a £1000 savings allowance (interest from savings) and those that are higher rate (40%) have a £500 allowance. Therefore, majority of people will have at least £500 of interest that they can earn tax free. Today that means holding around £50,000 of cash, which is a little under twice the average national income. According to ONS data to the end of the 2019/20 tax year, that’s £29,900 (median household income).

As I have said before, I am a great believer in holding cash. It provides for projects and emergency. Good planning – which is something that you already do better than most because you are here today, means getting a realistic estimate for something you intend to do and setting that aside prior to starting the project. This is therefore based on your research, quotes, and prudence to allow a sensible margin for error, or builder maths.

CASH FOR EMERGENCIES

Then there is your emergency fund. This is entirely subjective. It is an amount that enables you to sleep at night knowing that if something disastrous happened by the time you woke, you and your family would be able to cope financially. Things like loss of your job, the boiler breaking down, your car being vandalised or stolen, perhaps even a quick getaway fund from an abusive relationship. You might relate this number to how much you normally spend each month and hold a multiple of that.

RISKS CHANGE AS YOU AGE

Those that have a guaranteed income (people that are retired and living on State Pensions, annuities, or final salary pension benefits) arguably don’t need to worry about the loss of a job or their income. Its more likely that, if that’s you, you think of the extra income sources – from your investments or perhaps a holiday home that is let during a pandemic.

Most people will probably not need more than £50,000 (in 2021) but I did say it was subjective and personal to you. Cash doesn’t really work for you; it works for a bank who lend your money out at a rate that makes them rather more than they offer you to “store” it with them. If this drags on for months and years, you will undoubtedly see the spending power of your money reduce due to inflation. It needs to do some heavy lifting, which means investment. This comes at the price of market volatility in the short term, but if done properly, will deliver greater yields.

PARABLES ABOUT BARNS AND GRAIN

To my mind, it’s like an arable farmer keeping all their seed (cash crop) in a barn and not sowing enough. At some point, the barn will run out as its consumed or rots, missing out on all that multiplication and future harvests.

Anyway, given that most people don’t need to hold much more that £50,000 and would get the interest on it tax free anyway, there is no point using your valuable ISA allowance to give you something you already have.

Of course, this is what a plan will help determine and why understanding what the money is for and the reasons for your anxieties about money. Do get in touch.

Dominic Thomas
Solomons IFA

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ARE YOU MISUSING YOUR CASH ISA?Dominic2023-12-01T12:13:02+00:00

IT COULD BE YOU… BUT ITS UNLIKELY

TODAY’S BLOG

IT COULD BE YOU… BUT ITS UNLIKELY

If you have been a client for more than a week, you will have gathered that I like, want and encourage clients to hold some cash. The key word is some. This will be different for everyone and depend on several things. Your planned projects over the next 36 months and the emergency buffer you believe is appropriate should your employed (or self-employed) income cease. If you draw a pension from an annuity, the State or an old final salary pension, those are guaranteed and won’t stop until you do.

10 YEARS ON

Cash rates as we all know have been very low for a decade or so now. Holding cash in a world of rising costs over the “long-term” isn’t good for your wealth. By way of comparison 10 years ago a first-class stamp was 46p, today it is 85p…. ah you sensibly plan ahead and use second class, 36p has become 66p.

If I am generous about cash deposit rates, using a Cash ISA rate, a typical “decent” rate in 2011 was 2.75% today its about 0.4%. Remember, costs have gone up, the interest you have been getting has reduced. Holding cash for 10 years… that warrants a discussion, but let’s just assume it’s the same emergency “help me sleep at night” reserve. In June 2011 the rate of inflation in the UK was 4.2% today (data from May 2021) it’s around 2.1% and you will have likely heard some noise about it rising having jumped from 0.5% in February.

FEAR IS EATING YOUR WEALTH

There is no way that I would attempt to encourage you to place all of your money into investments, but unless you are preparing for Armageddon, I cannot see much logic in holding large sums. We can help get better rates for those with sums over £100,000 but its still peanuts, even using a decent cash management platform.

PREMIUM BONDS

Some of you like NS&I Premium Bonds. They are a bit of fun, the Government’s way of raising money without raising taxes, borrowing from taxpayers. Whilst NS&I are not backed by the FSCS cover of £85,000, they are backed by HM Treasury, so… pretty safe. Premium Bonds are really a lottery without loss of your stake money. The chance of your Bond winning even the smallest prize is now 34,500:1…. Rather less than your chance of contracting covid or going on holiday. So to have a reasonable chance you need at least £34,500 in Premium Bonds and preferably £50,000 (the maximum).

We are a small firm, so the sample size may not be terribly helpful, but in the 30 years or so (over 360 draws) that I have been doing this, not a single client has won more than £1,000 from a single Premium Bond. None of our clients have won prizes in the high value band (£5,000 to the two £1m jackpots each month).

I do understand that there is a charm about Premium Bonds, but the maths just doesn’t stack up for you. There are 25million NS&I customers – that’s getting towards half of the UK. The draw for June saw the usual 2 jackpot winners and a further 190 people that won £5,000 or more. The bulk of “winners” some 3,101,040 of them won £25 (97.89% of winners win £25). The total winnings (all prizes) was £91m.. which sounds a lot until you realise that £77.5m is those £25 payments. There were, wait for it.. 109,286million entries (qualifying £1 Premium Bonds). The chance of winning anything is certainly 3.1m in 109,286 million… that is a very small chance of winning. Most think of the big £1m jackpot, the chance in June was effectively 1 in 54,643,229,674, yes you get a bite at the same pie each month, but so does everyone else. So to put this in context you are 1 in 67,081,000 as a member of the UK population and you might be picked for a gong or almost anything.

The other thing that people forget is that £1m, which for most of us would be nice to have! isn’t the same value as £1m in 2011. It buys you rather less because of the decade of inflation, yet the prizes don’t really increase, because they are nice, neat, round numbers. Its a bit like the TV gameshow “Who Wants To Be A Millionnaire?” which first aired on 4 September 1998… thats now nearly 23 years ago! A million isn’t what it was, yet all of us were brought up to believe that it was a vast sum of money, which when we were children, it was. In fact £1m in 1998 is about the same as £1,840,000 now, but that doesn’t make a good strap-line for a TV show does it. To put it another way £543,478 now (roughly) was £1m in 1998.

The truth (remember I promised you that) however uncomfortable it is, is that holding cash will provide the sense of security but you will experience your spending power reduce each year. Admittedly not all the things we buy rise at the rate of Royal Mail, but have your basic costs really reduced or stood still? I suspect not.

You need to use your money in assets that grow and generate wealth. Talk to me.

Dominic Thomas
Solomons IFA

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Solomon’s Independent Financial Advisers
The Old Mill Cobham Park Road, COBHAM Surrey, KT11 3NE

Email – info@solomonsifa.co.uk Call – 020 8542 8084

7 QUESTIONS, NO WAFFLE

Are we a good fit for you?

Take Survey

PRIVACY POLICY | DATA PROTECTION

IT COULD BE YOU… BUT ITS UNLIKELYDominic2023-12-01T12:13:06+00:00

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