Lets try to increase the 'prizes' in prize bonds......

[MangoJoe]

I've recently began to look into my investment options and have found sites such as this to be an amazing and invaluable resource. Sincerely I'd like to say many thanks to all of you for your contributions and collective insightful wisdom.

One benefit to this type of research is that retrospective terms and conditions are captured for posterity. A prime example of which is in reading older posts and seeing as time goes by the cynically determined manner in which the prize bond operators are choosing to cut the weekly payout to their investors.

A number of years ago the norm was a million euro prize every month and the token 'Oh look - we have SO many happy winners' prize was €75...... Now the million euro prize is awarded just 4 times a year and because they think they can get away with it, the minimalist, economy prize is now just a mere €50 - A nice patronising pat on the head to keep us dolts settled, content, in line and most importantly - investing in their scheme.

Regardless prize bonds have only increased in popularity throughout and people will continue to partake happily as it is a much loved and deeply embedded institution of ours. However it is plainly obvious that greed and cynicism will lead to the terms and conditions being whittled away continuously, offering less and less chances of that nice occasional windfall to the investor and increasingly ever more gravy to those that pull the strings - Remember the less money they can sneakily orchestrate to give out annually the more pats on the back and fat bonuses they get from their own internal management/hierarchy.

It seems to me that people need to vote with their feet and withdraw all or a large portion of their funds while citing clearly to the operators that it is due to this pattern of profiteering, increasing lengthening of the odds and exponential erosion of chance in the investors favour. Personally I have am cashing in all but a very small handful of my prize bonds and would consider that my odds are now just marginally less poor than previously anyhow.

I think this site can play a very clear and powerful role in highlighting awareness and warning people of the actual increasingly poor returns they are being cynically offered and then providing the guidance and direction they need to invest their former prize bond deposits elsewhere. In other words lets open up a discussion on each and every viable alternative to prize bonds that offers people more than they are currently being allowed so they can then opt for investment options that actually do better suit them and offer real and tangible returns.

I would be confident that a large proportion of people with significant amounts of money invested in prize bonds are unhappy and unsatisfied with the current poor terms and outlook and would happily move once offered the current best alternative or any other long term sustainable and considered plan of approach.

I'd also anticipate that if enough people get behind this the prize bond operators will have no choice but to reconsider their sharp practice and cynical tactics and reverse their policy of denying us just because of their perception that they simply can...

I don't think this proposition is as outlandish as it may at first seem - Bear in mind that we are in a very small pond here and people can and do effect change with determination and a desire to stick by their principles, sense of right and wrong and safeguarding of their own interests.

Do also please bear in mind that this decline will continue if it is not actively contested and arrested.

- I'd welcome any thoughts and am open to education and correction on any and all points.

 

[vandriver]

The Ntma set the interest rate on these bonds.Interest rates have fallen to near zero.Therefore their isn't as much in the prize pot to pay out to punters.
The current interest rate on the prize bond pool is 0.85%.It used to be 1.3%.

 

[MangoJoe]

* Edited and resubmitted with some of my frustrations removed - Apologies for being out of order - I do respect that this site maintains high standards of discourse!

Seemingly the latest round of massive cuts were announced in June 2016..... on the Sunday of the June Bank Holiday weekend.....

- Also from what I can gather the banks have a history of strongly lobbying for the NTMA to make these cuts in order to create more business for themselves.

Given the current situation and the prospective outlook over the next number of years it must be said that anyone with a significant amount of prize bonds should really consider their strategy to date and evaluate all other options.

 

[dub_nerd]

I imagine when people evaluate their options they will find that Prize Bonds are not a rip off compared to other risk free (in the sense of government-guaranteed) investments. And the falling number of million euro prizes is good news for the investor (as opposed to gambler), who is interested in the overall return and not "occasional windfalls".

What is certainly true is that returns on non-risk assets are dismal. But Prize Bonds don't deserve to be singled out on that score.

 

[Duke of Marmalade]

Sorry Mango that is all so missing the point. If anybody is being ripped off it is the taxpayer who is paying 85bp tax free for these funds when it can borrow so much more cheaply in the wholesale markets.

 

[MangoJoe]

Thanks for the replies - I must say I'm surprised to be honest, I would have thought this seemed like a raw deal with the additional salt tossed on occasionally as they continue to cut prospects on such a regular and recurring basis. Still we've not had much discussion as of yet - Time will tell once more contributors come on board I expect.

As an aside a colleague who happens to be a long standing IT Professional of some repute brought this to my attention. Seemingly Fexco Killorglin are hoping to hire an IT Data Scientist on a fixed term contract (12 months) and listed amongst the responsibilities is the below:

"Filter and “clean” data (where necessary) by reviewing reports and performance indicators to locate and correct source of the problems."

Source: * I cannot yet post links - Search Irish Jobs Fexco Killorglin and you'll find it.....

This wording will do little to dispel peoples unease over perpetually failing to win even the minimum prize over extraordinarily long time frames.

- Some people it seems are now resorting to cashing in older bonds and re-purchasing on the basis that there is a growing belief that the newer bonds are statistically winning more frequently.....

 

[losttheplot]

Without knowing how many older bonds are in circulation or the age distribution of the bonds, we can't really say.
But if more people replace old with new, then it will appear that newer ones win more, simply because there will be more of them, reducing the probability of the old ones.
Each individual bond still has an equal probability of winning.

 

[Duke of Marmalade]

Mango do you hold the same conspiratorial view of Savings Certs whose returns have fallen from 10% p.a. to less than 1%?

 

[MangoJoe]

Hmmmm - Perhaps those more knowledgeable than I can give their 2 cents - But surely this doesn't have to descend to the realms of conspiratorial mutterings and unfounded suspicion.

Do we not know pretty accurately the size of the fund and can we then not deduce then whether or not the returns being offered as incentives to retaining the current base and incentivise new additions are relatively speaking pretty poor and worsening in a steady downwards trend?

Also if the 'conspiracy' mention relates specifically to the older/newer prize bonds tale I really have no strong feeling on the topic but as an IT professional I can categorically state that yes it is possible to get this process very wrong indeed.

Computers are at their hearts still binary beasts and we have to intervene shrewdly to make them operate at will in a truly random fashion.

We'll never get to hear of it should they ever realise they've a sub-optimal system in place, but behind the scenes it is certainly possible that there are tranches of prize bonds bearing alpha-numeric codes that will never, ever be winners.

This certainly offers one explanation as to why some people regularly report that they can't even seem to win €50 (formerly €75) in a 20 year period [as described on very many forums such as this and as related person to person otherwise]

- Don't ever assume that IT systems are infallible or perfectly designed, history offers a wealth of examples to the contrary.

 

[Duke of Marmalade]

Mango move along, there's nothing to see here. There is total transparency in Prize Bonds. We are told the size of the fund, the breakdown of the prizes and the effective interest rate. dub_nerd has produced an excellent analysis using the Poisson distribution, I am sure you will find it if you search.

You need a fairly substantial amount, over 50k anyway, for the randomness to smooth out.

Your suggestion that the falling trend in prizes might be related to failings in the IT random generator does rather belong in the more imaginative conspiratorial space

 

[dub_nerd]

Thanks for the replies - I must say I'm surprised to be honest, I would have thought this seemed like a raw deal with the additional salt tossed on occasionally as they continue to cut prospects on such a regular and recurring basis...

Do we not know pretty accurately the size of the fund and can we then not deduce then whether or not the returns being offered as incentives to retaining the current base and incentivise new additions are relatively speaking pretty poor and worsening in a steady downwards trend?

Prize Bonds are simply one of many vehicles by which the State, via the NTMA, borrows money. Of course they are going to "cut prospects on a regular and recurring basis" in the current interest rate environment. Rates have been dropping like a stone for years. Like any other depositors, Prize Bonds customers are free to shop around for a better rate from retail deposit takers. Yes, we do know the size of the fund, and the fact that it has been growing steadily implies that customers are no less happy with Prize Bonds than any other option.

As an aside a colleague who happens to be a long standing IT Professional of some repute brought this to my attention. Seemingly Fexco Killorglin are hoping to hire an IT Data Scientist on a fixed term contract (12 months) and listed amongst the responsibilities is the below: "Filter and “clean” data (where necessary) by reviewing reports and performance indicators to locate and correct source of the problems." This wording will do little to dispel peoples unease over perpetually failing to win even the minimum prize over extraordinarily long time frames.

Data cleaning is a fairly well understood term in IT. It's hardly surprising that a system as old as Prize Bonds has data cleanliness issues. It carries no implication that the prize drawing process is flawed.

Some people it seems are now resorting to cashing in older bonds and re-purchasing on the basis that there is a growing belief that the newer bonds are statistically winning more frequently.....

A "growing belief" in a statistic is surely an oxymoron. Either the statistics exist or they do not. In any case, the question is not whether new bonds win more often than old ones: of course they do. The growth rate of the total fund implies that they must since there are many more bonds of more recent provenance. The pertinent question is whether two equal sized tranches of older and newer bonds have an equal chance of winning. There are several reasons to believe they do and that the suspicions are founded on an urban myth.

Firstly, if older bonds never ever won prizes, someone would notice. Therefore, the myth is presumably that the chances of winning decrease gradually over time as bonds age. While it would be possible to engineer such a racket intentionally (through, say, a software algorithm), it is not possible to believe that such a situation could arise by accident. Therefore the myth depends on believing in an outlandish conspiracy to defraud.

Secondly, the Prize Bonds process is monitored by independent auditors. They'd have to be in on the fraud. So would the NTMA who monitor each draw. So would the independent analysts who analyse the results of every draw to confirm its randomness.

Thirdly, the myth is supported by people (like you) repeating the allegation without supporting evidence. I've seen several actual records of Prize Bond tranches monitored over periods of years, and they follow the expected statistical outcome.

Fourthly, there is a much more simple explanation for the myth, based on human nature. If your neighbour's Prize Bond wins and yours doesn't, it is hard wired into people to sense an injustice. This is compounded by widespread ignorance of how statistics work. I've heard plenty of people complain about the Prize Bonds they've had for twenty years. They are invariably talking about a handful of bonds which -- if they had any clue of the odds involved -- have won exactly what they should expect: nothing.

Computers are at their hearts still binary beasts and we have to intervene shrewdly to make them operate at will in a truly random fashion.

Pseudo-random number generators which produce good approximations to random sequences have been around for decades and are familiar to every programmer who knows their trade. While it's certainly possible to misuse them, it would be next to impossible to accidentally do it in such a way that it weights the selection of items in a sequence according to their age of insertion.

We'll never get to hear of it should they ever realise they've a sub-optimal system in place, but behind the scenes it is certainly possible that there are tranches of prize bonds bearing alpha-numeric codes that will never, ever be winners.

But the conspiracy only works if they get progressively less likely to win over time!

This certainly offers one explanation as to why some people regularly report that they can't even seem to win €50 (formerly €75) in a 20 year period [as described on very many forums such as this and as related person to person otherwise]

Yes, but a much more plausible explanation is that they simply don't understand the odds of winning. There are probably many thousands of people with tiny tranches of, or even single, Prize Bonds that they've had since their First Communion. There's no reason to expect them to win €50. The odds are against it. Here's a tip: the next time someone complains to you about not winning in 20 years, ask them the odds of that happening. If they can't tell you, then you've no business treating it as evidence of anything.

 

[MangoJoe]

What a thoroughly excellent post - Many thanks dub_nerd.

* For the record - My theoretic musings around the potential fallibility of the random number generator was merely based on the possibility that it was not performing optimally through a possible degree of poor design/implementation - ie in not returning an equal chance to each and every bond - I never meant to imply fraudulent activity was at play.

 

[trasneoir]

You seem to be assuming that a truly random distribution of wins among prize bonds would result in each prize bond delivering an about-average return. That's only true over an infinite time scale.

True randomness tends to result in distributions where we pattern-hunting-animals perceive "clusters" and "gaps" (or "steaks and droughts"). When you mix money and randomness, it always generates this superstitious thinking - it's why we've got gamblers with "systems" for roulette, slots etc.

 

[dub_nerd]

Just for the record, at current rates you'd expect a single Prize Bond to win a €50 prize on average every 1330 years! Some will do better than that, some worse.

 

[mammyof2]

Incidentally (and I know that there has been a thread on this before), what are people's thoughts about Prize Bonds over saving account over a period of three years? A relative of mine has been working overseas and has savings of approximately 80k. She is planning to spend the full amount on a house renovation that, for various reasons, can't start until mid 2020. So she has maybe three, maximum three and a half years during which she needs to keep the money but does not want to take any risk with it (so stocks are not an option). Looking at the best buys, the best she can get on a three year account is not much over 1%, so more like 0.5% after DIRT. Would she be better off buying Prize Bonds? Any thoughts?

 

[Duke of Marmalade]

mammy using dub_nerd's calculator I work out that over 3 years the payout in €50 prizes would be as follows:

90% chance more than €1,100
50% chance more than €1,400
10% chance more than €1,700

This ignores the negligible chance of winning the big prizes, which I reckon as the equivalent of around €2,000 worth of lotto tickets; consider it as a sweetener, like being in a raffle after buying a new car.

The above €50 payout distribution which is tax free beats all other instant access deposits. However the PTSB Fixed Term deposits are superior.

mango perhaps it would assuage your indignation and your sense of a cause celebre here if you thought about this in a different way. You seem to regard Prize Bonds as a sort of constant game but where the house keeps reducing the payouts. This isn't happening with the Lotto for example. The way you should see it is that the house is not changing the payouts at all - it still gives 100% payout. But it is reducing your stakes. Your stakes are in fact the interest earned on your funds and these have collapsed along with all other interest bearing instruments.