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How to win more cash from Premium Bonds

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Last updated on

05 August 2014

With billions saved in Premium Bonds, here's how to improve your chances of becoming a winner.

The name’s Bond, Premium Bond

When Chancellor Harold MacMillan announced the launch of Premium Bonds in his April 1956 Budget, Labour spokesman (and later Prime Minister) Harold Wilson condemned them as a ‘squalid raffle’.

Despite political and religious opposition to gambling, the Premium Bonds savings scheme – aimed at raising money for the nation’s coffers – went ahead. The first Premium Bonds were put on sale by National Savings & Investments (NS&I) in November 1956, with the maiden prize draw following in June 1957.

Originally, the top prize was £1,000, but as Premium Bonds became more popular, both prize pots and the size of tax-free prizes increased. In 1991, the monthly jackpot hit £1 million. There were two £1 million monthly prizes between 2005 and 2009, and as of August 2014 this has now been reinstated.

You can buy as little as £50-worth (if you pay by standing order or bank transfer) up to a maximum of £40,000.

How prizes are awarded

To show you how the prize pot is divided up, here are the results of the August 2014 prize draw:

Prize value

No. of prizes

Total

% of total

£1,000,000

2

£2,000,000

3.6%

£100,000

4

£400,000

0.7%

£50,000

7

£350,000

0.6%

£25,000

15

£375,000

0.7%

£10,000

38

£380,000

0.7%

£5,000

76

£380,000

0.7%

£1,000

1,110

£1,100,000

2.0%

£500

3,330

£1,665,000

3.0%

£100

15,211

£1,521,100

2.7%

£50

15,211

£760,550

1.4%

£25

1,863,026

£46,575,650

83.9%

Total

1,898,030

£55,500,000

100.0%

As you can see, there were two £1 million winners, four winners of £100,000, seven winners of £50,000 and 15 winners of £25,000. In total, these lucky 28 people won a total of £3,125,000, or around 5.6% of the total prize pot of £55.5 million.

However, more than four-fifths (83.9%) of the prize pot (over £46.5 million) was paid out in the form of over 1.86 million prizes of £25 – hardly a life-changing amount.

The odds

Alas, the odds are stacked against you. For the August draw, each individual Bond had a one-in-26,000 chance of winning a prize. So, to win the big one, you have to overcome astronomical odds.

How you could win more

We’ve now established that it’s terrifically hard for a single bond to win even a £25 prize, never mind any of the top awards. So what can you do to increase your chances of winning?

Live in the south of England is one often-trumpeted solution. However, there are only more winners down south because more people live there and more people who live there hold Premium Bonds. So statistically people who live there are going to win more often.

In fact, the only way to win more prizes is to buy more Bonds.

This is because each prize-winning Bond number is selected randomly by ERNIE (which stands for Electronic Random Number Indicator Equipment), so there is no way to beat the system. Unless you can come up with a formula which predicts thermal noise in transistors, that is!

Should you invest in Premium Bonds?

Only you can answer this question, as so much depends on your personal attitude to risk, your tax status, and so on.

With average luck, someone holding the maximum £40,000 of bonds could expect to win, say, 15 prizes a year, mostly £25 payouts. In other words, that money might earn perhaps 1% to 2% in equivalent interest, and the money is completely safe, with an outside chance of a huge windfall. Of course, it's that outside chance that's so tempting.

Make sure you haven't missed a past prize

Finally, you can check for unclaimed prizes at NS&I. Who knows, you may have missed out on a £25,000 windfall...

If you'd prefer to put your cash into a traditional savings account, check out the lovemoney.com savings centre.

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