David Prosser: Take the Sugar ad with a pinch of salt

The Apprentice, last year's surprise hit TV show, will be back on our screens later this month, the BBC is delighted to announce. But here's a tip for competitors battling it out for a job from Sir Alan Sugar: don't question him too closely about his advertisement for Premium Bonds that has been relaunched for the new year.

It's not just that the ads are intensely irritating, though they drive me up the wall. I'm more concerned about the misleading sales pitch that Sir Alan makes for Premium Bonds.

"I'm not a gambler," Sir Alan tells us, explaining that this is why he believes in Premium Bonds (so much so that he is donating his appearance fee to charity, though why this should make us any more inclined to invest is not clear).

In fact, investing in Premium Bonds is a huge gamble. Unlike the National Lottery, you don't lose your stake after every draw. But if you don't win any prizes over the next 12 months, the purchasing power of your cash will have been eroded by inflation. In other words, you'll lose money in real terms.

Over time, of course, it's fair to expect to win an average number of prizes. But the way the Premium Bond prize draws are currently set up, that would mean earning an annual return of just 3 per cent on your money. It's barely enough to cover the cost of inflation - currently around 2.5 per cent.

The best bank and building-society accounts, by contrast, pay 5 per cent a year. And while savings providers have the right to cut interest rates at any time, they're guaranteed to pay you something, unlike the Premium Bond prize fund.

National Savings & Investments (NS&I), the government-backed savings bank that runs the Premium Bond draws, points out that winnings are tax-free. But so are cash individual savings accounts (ISAs), which will pay you more than 5 per cent a year in the best cases.

The truth is that the only way you'll really be better off with Premium Bonds is if you win one of the big prizes. But don't bank on it - for example, the chances of a single bond picking up one of the two £1m jackpot prizes awarded each month is around 13 billion to one.

Don't be misled by NS&I's claim that each bond has a one in 24,000 chance of winning each month, which looks good for investors who have the maximum holding of 30,000 bonds. Some 87 per cent of the prize fund goes on small payouts - £50 or £100 - so winners still won't be quids in.

In fact, Premium Bonds represent exactly the type of gambling that Sir Alan says he dislikes, even before you consider the opportunity cost of missing out on something better. If, like him, you're not keen on uncertainty, Premium Bonds are one to avoid. The only sure thing is that for all but the luckiest of bondholders, far better value is available from other savings products.

Here's a great idea we should import from Ireland as soon as possible. Regulators there are to ban credit-card companies from increasing people's credit limits without first asking them whether they want to be allowed to borrow more.

It's certainly a sensible step. Lenders in the UK routinely write to customers to say that their credit limits have been raised. Borrowers don't have to take up the extra lending on offer, of course, but why give them the option of going further into the red if they haven't even solicited the facility?

Credit-card companies are quick to claim that they're responsible lenders. But one of the most significant factors in Britain's consumer credit boom has been the aggressive marketing campaigns of many lenders, whose interests are well served by encouraging us all to borrow more.

Independent Partners; request a free guide on NISAs from Hargreaves Lansdown

Voices
On the last day of campaigning before the polling booths open, the SNP leader has written to voters in a final attempt to convince them to vote for independence
scotland decidesIs a huge gamble on Scotland's oil keeping the First Minister up at night?
Arts and Entertainment
Rosalind Buckland, the inspiration for Cider with Rosie died this week
booksBut what is it like to be the person who inspires a classic work of art?
Arts and Entertainment
Pharrell dismissed the controversy surrounding
musicThe singer said 'the last thing I want to do is degrade'
Life and Style
techApple has just launched its latest mobile operating software – so what should you do first?
PROMOTED VIDEO
News
A male driver reverses his Vauxhall Astra from a tow truck
newsThe 'extremely dangerous' attempt to avoid being impounded has been heavily criticised
Arts and Entertainment
tvReview: An undercooked end (spoiler alert)
News
i100
Sport
Cesc Fabregas celebrates his first Chelsea goal
footballChelsea vs Schalke match report
Arts and Entertainment
Toby Jones (left) and Mackenzie Crook in BBC4’s new comedy The Detectorists
tvMackenzie Crook's 'Detectorists' makes the hobby look 'dysfunctional', they say
Life and Style
fashion

Olympic diver has made his modelling debut for Adidas

News
i100
Sport
footballBayern Munich vs Manchester City match report
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Trainee Recruitment Consultant Birmingham

    £18000 - £23000 per annum + Comission: SThree: The SThree group is a world lea...

    Trainee Recruitment Consultant - Birmingham - Real Staffing

    £18000 - £23000 per annum + Commission: SThree: Real Staffing are currently lo...

    Recruitment Consultant - Soho - IT, Pharma, Public Sector

    £20000 - £25000 per annum + OTE £35,000 first year: SThree: The SThree group i...

    Sales Executive

    £20 - 24k (Uncapped Commission - £35k Year 1 OTE): Guru Careers: We are seekin...

    Day In a Page

    Mystery of the Ground Zero wedding photo

    A shot in the dark

    Mystery of the wedding photo from Ground Zero
    His life, the universe and everything

    His life, the universe and everything

    New biography sheds light on comic genius of Douglas Adams
    Save us from small screen superheroes

    Save us from small screen superheroes

    Shows like Agents of S.H.I.E.L.D are little more than marketing tools
    Reach for the skies

    Reach for the skies

    From pools to football pitches, rooftop living is looking up
    These are the 12 best hotel spas in the UK

    12 best hotel spas in the UK

    Some hotels go all out on facilities; others stand out for the sheer quality of treatments
    These Iranian-controlled Shia militias used to specialise in killing American soldiers. Now they are fighting Isis, backed up by US airstrikes

    Widespread fear of Isis is producing strange bedfellows

    Iranian-controlled Shia militias that used to kill American soldiers are now fighting Isis, helped by US airstrikes
    Topshop goes part Athena poster, part last spring Prada

    Topshop goes part Athena poster, part last spring Prada

    Shoppers don't come to Topshop for the unique
    How to make a Lego masterpiece

    How to make a Lego masterpiece

    Toy breaks out of the nursery and heads for the gallery
    Meet the ‘Endies’ – city dwellers who are too poor to have fun

    Meet the ‘Endies’ – city dwellers who are too poor to have fun

    Urbanites are cursed with an acronym pointing to Employed but No Disposable Income or Savings
    Paisley’s decision to make peace with IRA enemies might remind the Arabs of Sadat

    Ian Paisley’s decision to make peace with his IRA enemies

    His Save Ulster from Sodomy campaign would surely have been supported by many a Sunni imam
    'She was a singer, a superstar, an addict, but to me, her mother, she is simply Amy'

    'She was a singer, a superstar, an addict, but to me, her mother, she is simply Amy'

    Exclusive extract from Janis Winehouse's poignant new memoir
    Is this the role to win Cumberbatch an Oscar?

    Is this the role to win Cumberbatch an Oscar?

    The Imitation Game, film review
    England and Roy Hodgson take a joint step towards redemption in Basel

    England and Hodgson take a joint step towards redemption

    Welbeck double puts England on the road to Euro 2016
    Relatives fight over Vivian Maier’s rare photos

    Relatives fight over Vivian Maier’s rare photos

    Pictures removed from public view as courts decide ownership
    ‘Fashion has to be fun. It’s a big business, not a cure for cancer’

    ‘Fashion has to be fun. It’s a big business, not a cure for cancer’

    Donatella Versace at New York Fashion Week