Premium Bond Win

Around the time I was born in 1971 I was given £7 in premium bonds, each bond £1 in value.

None of those 7 bonds has ever one a prize ... until now!

One came in with a £25 win. So I thought I'd see just how lucky I've been.

Currently, the minimum purchase of premium bonds is £100 (ie 100 units, they are still a £ each)

Since October 2009, the odds per £1 unit winning any prize has been 24,000 to 1

If you have 'average luck' the rate of return should equal 1.50%. All prizes are tax-free

So what is my £1 from 1971 worth? Well, I have data available till 2010. In 2010, £1.00 from 1971 is worth


£11.00 using the retail price index or £19.60 using average earnings

So my £25 looks good value, but of course the other £6 of bonds have never won, so I am about level.
An alternative way of looking at it, without getting complicated or worrying about inflation , is just to divide the £25 return by the number of years held (call it 40) and that gives 0.625% on average (again, forget compounding!) a year.
So on that score, I'm about 2.5x less lucky than average.

Fingers crossed for the £million prize next month then...

HSBC - marketing genius...NOT!

Not so long ago I wrote an article about how HSBC were advertising a rate of return (over 18%) in their window as it it were a deposit rate. Only when you were close enough to read the small print did you find this was a structured product and there were numerous risks.
Their advertising annoyed me - it is just misleading at worst and sneaky at best, appearing at first glance to be one thing but on closer inspection it is another.

I'll say agian, I am not naive. I know that advertising isn't real life. I know that my washing won't be that much whiter than last time or that a 6th blade isn't really going to shave me that much closer.
But financial services operates under different rules than retail so imagine how delighted/surprised/disappointed (take your pick) I was to see the latest ad in the window of my local HSBC.

They've gone all 'retail' (trying to be like FMCG for those in the know) on us and decided to have a 'SALE'
7.5% is the rate they'll charge us to lend money. Sale? Let's see.

Let's break this down.

The previous price before the 'sale' was 7.6% (up to Dec 27 2010, it doesn't say how long it was at that rate for)
So a saving of just 0.1%, when base rates are 0.5% - So their margin has dropped from about 7% to about 6.9% - Sale? Not much.

It gives no comparison anywhere of the prices you'd have paid at 7.6% compared to the 'sale' at 7.5% - so I'd argue for the layman the 'sale' tag has no day to day application as you can't see what you are saving in £ each month or year or over the term. Sale? Hardly.

It gives no comparison of rates elsewhere, for example at other high street banks, so unlike retail/FMCG/supermarkets who will claim to be cheaper than rivals and show their prices, you have no such relative comparison. Sale? Who knows.

In my opinion another fine example of a high street bank playing by the rules, so that they have done nothing wrong (the current rate is cheaper than the previous after all), so you can't complain but nothing like the super friendly, 'we're on your side' image they project.

Bah!