From August there will be two chances each month to win £1 million with Premium Bonds. The extra £1million jackpot reflects rising interest rates and a redistribution of the prize fund. There are more prizes below £1000 and slightly fewer between £5000 and £50,000.
Premium Bond sales need a boost – they have fallen for two years as National Lottery sales have recovered. Both gambles help keep down taxes. Premium bonds by reducing Government borrowing. And the Lottery through the 12p tax on every pound we bet. In addition some of the 28p from each £1 which funds the so-called Good Causes is in fact being used to replace normal public spending on things like schools and the health service.
The Lottery is a pure gamble. Half the money is used for prizes. And while the odds of winning small prizes are not bad – around one in eight for the Daily Play game and one in 54 for Lotto – the odds against winning that big Lotto jackpot are nearly 14 million to one.
Premium Bonds are different. You can always get back the money you have spent. It is just the interest that is gambled. The chance of winning any prize any month with one bond is one in 24,000. In other words if you own one bond you can expect it to win a prize once every 2000 years. Julius Caesar would only now be expecting his first £50. If you own 100 bonds – the minimum you can now buy – you can expect a prize every twenty years. But if you own the maximum 30,000 bonds you can expect on average 15 prizes a year, nine or ten at £50 and two or three of £100. At that level Premium Bonds are more an investment than a gamble. You can expect a shade under 3 per cent return on your money. Prizes are tax free. So for a higher rate taxpayer that is the same as earning 5% and paying 40% tax on it. If you take the higher prizes into account – they range from £500 to £1 million – the return is 3.25%, which is worth 5.42% to a higher rate tax-payer and a more modest 4.06% for basic rate taxpayers.
No wonder 200,000 serious investors own the maximum allowed - £30,000 of bonds. But even for them winning £1 million is a very long shot. From August the odds each month against winning the jackpot are 13 billion to one for each bond. Even a maximum bondholder will have to wait 37,222 years to have an even chance of winning a million.
A lot of bread for a van
It could turn out to be the most expensive car in the world. It’s red. It’s
a Ferrari. And it’s called, err, the Breadvan. Or more poetically in Italian ‘la
Camionetta’. This unique vehicle is being sold by Christie’s on August 18th
in Monterey Bay south of San Francisco. It was born out of a dispute between
Enzo Ferrari and a Venetian count, Giovanni Volpi di Misurata. In 1961 Volpi
poached engineers from the Ferrari boss who retaliated by refusing to sell the
Count his latest model. So Volpi used the engineers to create a new Ferrari out
of an older one. And la Camionetta – its high back looks like a bread delivery
van – was created. Raced many times, though never taking the chequered flag, its
unique shape and flamboyant owner ensured lasting fame. Never before on public
sale, Christie’s estimates the 44-year-old vehicle will fetch up to £3,000,000.
Throwing cash away
I have said it before and I will no doubt say it again. A bit of care when
you retire can boost your income by hundreds of pounds a year. Retirement is the
moment when you convert the money you have saved up for your pension into an
income for life. Normally people do that at 65 and the usual way is to buy an
annuity. You give the insurance company your pension fund. It promises to pay
you money every month until you die.
Everyone has the legal right to take their fund and find the best deal they can – called the open market option. The amount you get can vary widely. A man aged 65 with a pension fund of £100,000 can get £4900 a year for life guaranteed to rise each year with inflation from the best provider. But just £4400 a year from the worst. Figures for a woman are £4450 and £3830. At 65 a man can expect to live around 16 years and a woman 19. So the wrong choice can cost a man £8000 and a woman more than £11,000.
New figures from the insurance industry show that the proportion of people who shopped around in 2004 was only around one in three. In other words, two thirds of the people who retired threw money away. If you are approaching retirement get a quote from the company you saved your pension up with and then see how much you can beat it by elsewhere. Remember to compare like with like – will your annuity rise each year with inflation? Will it pay out to your spouse if you die first? And does it take account of whether you smoke or have an illness?
‘70% off!’ is now off!
Have you ever wondered exactly what those ‘70% off!’ signs in shop windows
actually mean? A recent court case has clarified the seventeen year old law on
misleading adverts. The case was brought by the Office of Fair Trading against
men’s clothes retailer The Officers Club. Since 1993 it had offered a permanent
promotion in its 200 shops of ‘70% off everything’. But in the High Court Mr
Justice Etherton held that the offer had ‘harmed…consumers’ and been
‘misleading’. He set down three conditions which must apply for offers of
discounts and sale prices to be legal. First, the retailer must offer the same
goods for sale at the higher price. Second it must offer them in sufficient
quantity and for a sufficient length of time for potential customers to be aware
of them, to consider buying them, and for some customers to have actually bought
them. Finally, the retailer must genuinely believe that it could sell the goods
at that higher price. In the case of The Officers Club, the Judge decided that
the ‘70% off’ price was actually the company’s standard selling price. The
Office of Fair Trading told Money News "We felt that the original price was
never a real price and The Officers Club didn’t believe they could sell it at
that price."
The Officers Club, which was not available for comment, stopped its ‘70 % off’ offer last year.
Time ripe for sound investment
For £20 you can buy an electronic digital clock, corrected to the second by
radio signals – even when summertime comes and goes.
 |
| A late Victorian English bracket clock with twin
fusee movement and a gong chime.
Height 18.75" Price £4,700 William Turk |
But that has not diminished the enthusiasm for antique clocks, with a pendulum, a dial, hands and a bell to mark the hours. William Turk, a qualified clockmaker, runs his own clock shop in southwest London "If you want to tell the time buy an electronic clock. But if you want a work of art, a thing of beauty that also tells the time, buy a clock." He says that the price of clocks has held up well even when antique furniture has had a difficult time. "A couple of years ago I looked at prices and they had risen by 100% in six years, the same as the housing market." The secret he says is quality. "Anything below £1000 is not going to be of any quality or investment potential. A French clock is the starting point at around £2000 plus. If you want an English clock that strikes then about £4000 for something of good quality. For that you would get a Victorian English fusee bracket clock in a mahogany case. For a Georgian clock £8000 plus, and then the older the more expensive – if original." Always go to a reputable dealer, such as a member of the British Antique Dealers Association who will guarantee that the clock is as described and in full working order.
Coventry correction
In the July Money News I mentioned the Coventry Building Society Sixty-Plus
Saver account offering 6% for a year – and 4.75% after that – on up to £250,000.
I recommended putting money in it for a year and then moving it out.
Unfortunately the small print shows that you can only put £2000 a month into
this account and the first year interest rate has now been cut to 5.5%. For a
chunk of money up to £250,000 cahoot with no restrictions or bonuses paying 5.1%
is currently the best buy.
August 2005