Premium Bonds. Calculate your odds.

Martin Lewis, moneysavingexpert.com.

Recently I was beaten by a maths equation.  Not fun for a numbers nerd like me, until I realised it was a calculation so difficult it’d take some serious IQ power.  In the end to defeat it I recruited a post doctoral cosmology statistician; and on the back am very pleased to have developed the first ever Premium Bond Calculator that actually works out your odds of winning.

Accurately cracking this conundrum been a pet peave of mine for a while.  In the past I’d written an article with a basic assessment Premium Bonds: Are they worth it; yet to give a legitimate answer to a question such as “if you’ve £2500 in a premium bonds, what are the chances of beating a top savings accounts returns over a year” takes a lot more. 

Once the algorithm was written, using whats called ‘multinomial probability’; each time the probability distribution changes, it takes a powerful computer 14 hours to rework the answers.  Still sometimes the fun is just in knowing.   

Oh and the answer is you’ve only a 24% chance of beating the saving account with £2,500 in, if you’re a basic rate taxpayer.