ERNIE turns 60

The first premium bond was sold on 1st November 1956, with £5 million worth of premium bonds sold on the first day alone. There are now 21 million people holding more than £63 billion in premium bonds, proving that they are still a popular form of investment. The first draw was held on 1st June 1957 for a top prize of £1,000. In the intervening six decades, £17 billion has been handed out in the form of 355 million prizes using updated versions of the original electronic random number indicating equipment (that’s ERNIE to you and me).

With premium bonds celebrating their 60th birthday recently, it’s a great opportunity to look at just how good an investment opportunity they are to add to your portfolio. Whilst they remain popular and now offer two jackpots a month of £1 million each, they are essentially a lottery rather than a viable investment opportunity.

For every £1 you invest, you receive one unique bond number, which gives you one entry into the draw to win a tax-free cash prize. You won’t earn any interest on your premium bonds either, as all the interest accrued is used to fund the prizes. The odds of winning £25 for each bond number is 26,000 to one, with the odds of winning the £1 million jackpot rising to 26 million to one. All of which means that only those lucky few who win one of the bigger prizes will receive a return which beats inflation, so if you’re after a guaranteed return, premium bonds are not the savings product for you.

However, there are some benefits to putting your money into premium bonds. As a National Savings & Investment product, all the money invested is backed by the treasury. This means that your cash is protected in full as opposed to the security offered by the Financial Services Compensation Scheme which banks offer. Cashing in your bonds can be done easily either by post, phone or email, and there are no charges for doing so.