PREMIUM BONDS -
THE FACTS
You hear about people getting rich
from sharp investments on the stock
market or from the odd property deal but it seems a huge number of
people are hitting the jackpot with Premium Bonds.
Launched in 1956 by Harold Mamillan, Premium Bonds were
introduced to "reduce inflation and encourage thrift."
The basic principle is that investors buy a set number
of "Bonds" and instead of gaining interest, as you would with
a normal savings account, you are in with a chance to win a cash prize.
Selecting a winner
All winners are selected by ERNIE (Electronic Random
Number Indicator Equipment), who churns out lists of numbers.
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| The new and improved ERNIE 4 |
The first Bond number that matches the numbers produced
by Ernie wins the jackpot.
The latest ERNIE (version 4) produces one million winning
numbers an hour, three times faster than ERNIE 3, 15 times faster than
ERNIE 2 and 500 times faster than ERNIE 1.
According to National Savings and Investments (NS&I)
every month Premium Bonds give you the opportunity to win £1 million
tax-free, or one of around a million other prizes, from £50 to £100,000.
(Figures based on September 2004's draw.)
As of September 2004 you have a 24,000 to 1 chance of
winning a prize.
The randomness of ERNIE and the Premium Bond draw is
certified by the Government Actuary's Department, which carries out a
number of statistical tests after each draw.
Once they are satisfied that the results of the draw
are random they issue NS&I with a certificate to that effect.
Without this NS&I is not permitted to publish the
numbers or issue Premium Bond prizes.
The pros and cons
Although there is no risk attached to owning Premium
Bonds there are still positives and negatives to consider.
There are many plus sides to buying Premium Bonds. These
include:
- Premium Bonds are considered relatively safe and
are backed by the Treasury
- anyone aged over 16 years can buy Premium Bonds
- Premium Bonds can be bought for children under 16
by their parents, grandparents, great grandparents or guardians
- the same Premium Bond can win again and again, there
is no expiry date as such
- Bonds can be cashed in at any time
- winnings are tax-free
- the fun involved if you do become a lucky winner
Although relatively minor there are some downfalls to
investing in Premium Bonds. They include:
- the value of the Bond is eroded by inflation
- you do not receive any interest on your investment
- you are not guaranteed to be a winner
Getting started
Premium Bonds can be purchased from your Post Office
or by post from National Savings & Investments (NS&I). You can
also download an application form from the NS&I website or phone 0845
964 5000 to request one.
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| Agent Million
delivers the good news to winners personally |
Each Bond is £1, the minimum investment is £100,
the maximum £30,000.
Every £1 Bond enters the monthly draw and has an
equal chance of winning.
On the first of every month ERNIE selects a batch of
winning numbers, if your bonds match, you win a prize.
If you are a winner you will receive confirmation on
the post, although winners of the jackpot £1 million get a personal
visit from Agent Million.
Read
the feature story.
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