I recently received a copy of their annual report and I had a look through it with interest. Their marketing is pretty good and I guess that we are all attracted to big numbers so the fact that every month, one bonus bond holder will win $1million tax-free, we instantly like the concept. If you factor in all the lower prizes that can be won, it looks good.
OR DOES IT?
Actually, I don’t think so.
The average odds of winning any prize in each monthly prize draw is 1 in 25,003 (to the financial year ended 21/03/17). These odds have lengthened from the previous financial year of 1 in 19,731. You actually have better odds of winning division 3 Lotto.
We can also look at it another way. The total prizes awarded as a percentage of the scheme’s assets are just 1.39% (reduced from 1.69% for the previous financial year).
Realistically, unless you are the lucky 1 in 25,003 its not you. The only answer I can come up with is the ANZ. Whilst fully accepting that the scheme is required to maintain sufficient liquidity to enable people to easily redeem their bonds (and the cost of this), the scheme charges around 1.28% of the net asset value (or approximately $45.1million in 2017) to manage and administer the scheme.
The reality is even simple term deposits are likely to offer you much better returns. Factor in other fund types such as KiwiSaver and Managed Funds, the chances of making a decent return are much higher.
The reality is if you are relying on bonus bonds as a means of saving for your retirement, think again. Even if you manage to win the odd prize, you will struggle to keep up with inflation.
By all means, enjoy the thrill of the flutter but for your long-term planning, it’s a huge no from me.
If you have money to invest, or you have a sudden urge to place your bonus bonds funds elsewhere, get in touch and we’ll help you increase your odds of a wealthier future.
(06) 751 4510