This week, I learnt about Premium Bonds.
Premium (or lottery) bonds were introduced by Harold MacMillan in 1956 as part of the government's National Savings and Investment Scheme. This is how they work:
1. You pay some hard earned cashola for a bond. You can sell this back to the government, at your request, at the original price you paid. No more. No less.
2. The government pays a return on the bond but not to you. Instead it goes into a central prize fund.
3. A monthly lottery distributes premiums to those bond-holders whose numbers are selected randomly.
4. The machine that generates these random numbers is called ERNIE. I kid you not. It's acronym of Electronic Random Number Indicator Equipment.
5. Your chances of winning (according to the Premium Bond Probability Indicator on moneysavingexpert.com) are as follows:
Hold £100 over a year = 3.28% chance of winning anything
Hold £1,000 over a year = 28.3% chance of winning anything
Hold £10,000 over a year = 96.4% chance of winning anything
6. The anything you could win ranges from £25 to £1,000,000. But you should know that in November 2011, 99.75089525% of the prizes made available were £100 or less. Just to be precise. I wouldn't want any rounding up or down of the decimals to mis-represent the opportunity here.
After all, what could be a sounder investment choice than essentially putting a down payment on a whole lot of future lotto tickets?
But really, who am I to quibble about such things: apparently one in three Britons invest in them.
8 comments:
This is really funny! I had no idea about this, and it must be a totally cultural thing, to feel that this is a good investment. I like that they named the number generator Ernie-- to add to the banking fun!
Ariana I didn't believe my colleague (who is German) when he was telling me about this. We were giggling at the ridiculous-ness of it...like a couple of naughty schoolkids.
Oi, you! That's orientalism, that is! Jumped up Oz-ite, laughing at our precious national institutions. I've had one of those for forty-odd years, I keep it in my investment portfolio along with me Post Office Savings Book. Safe investments they are, at least I can get my money back - less inflation, of course. Ohh!
Hear you Assies like a good return on your investments - which fly do you want? I fancy the one on the left :-D
Ha! You know we Aussies are an irreverent bunch Alan. I mean what did you expect when you Brits sent all of your undesirables to the other side of the world all those years ago? That we would sit quietly and not get up to any mischief? Dreamin' mate, dreamin'...
By the way, did your number ever come up? ;-D
I've held £300 worth premium bonds for ten years or more and never won a penny! Stupid or what?
No comment Jack ;-D
A good friend of mine won £100,000 a couple of years ago and I win £25 or so most months.
The lottery element is just another way of paying interest and Premium Bonds are a useful component of a balanced investment strategy.
Aha! So it does work then...
Jack meet lucky Matthew. Maybe some good luck will rub off or something...
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