Premium Bonds

The Premium Bond is a British government lottery, organised by National Savings and Investment (NS&I). It is a government backed saving scheme, which offers an opportunity to save money and simultaneously the possibility of winning some money. You do not receive any interest on your savings, however, the interest generated goes into a prize fund, and every month one person wins one million pounds from it.

In 1956, the Rt. Hon. Chancellor of the Exchequer Harold Macmillan introduced this scheme in the hope that it would appeal to those who respond to the incentives of fortune. This was at a time of high inflation after the war and the scheme was useful in generating cash quickly by encouraging everyone to save money.

In 1959, my grandfather who was a war hero in the RAF bought ten pounds worth of bonds. His dream was to start a small airline. Back then, that was a lot of money because the maximum you could invest in the bonds was only £100 pounds, and the top prize was only £1000. However, this was a life-changing amount because you could buy a house for that much.

After he died, my dad inherited them, and now I have them. I could always cash them in, but what can you buy with ten pounds these days? Had he invested the money in a nice house with a swimming pool, it would have been worth a lot more today.

Although the hype of it making your dreams come true is “nice”, the sad fact of reality is that majority of the people will not be winning anything, because this is how a lottery works; everybody pays in so that a lucky few can gain from it.

Odds

The odds of winning something are different from odds of winning the first prize. In June 2016, the odds were 30000 to 1 of winning something. Therefore, if you had the maximum £30,000 invested, then you could win something every month. The terms and conditions of August 2015 state the following.

The number of prizes in each month’s draw will be calculated by dividing the total number of Bond units eligible for that draw by a specified number (“the odds”) as follows:

Total number of eligible Bond units / Odds for the draw = Total number of prizes

The specified number (“the odds”) is determined by the Treasury from time to time.

Other Bonds

There are many types of bonds such as income bonds, growth bonds, and equity bonds; however, Premium bonds have been extremely successful because they are risk free. The government will buy the bonds back from you and you get your full capital back, devalued though it may be. Part of the reason for their success is that majority of the people do not understand statistics, and usually the feeling of hope and expectation of winning outweighs logic.

On the surface, it seems like a great idea, because every year you could say to your brother Rodney, “Same time next year we could be millionaires!” It allows you to live in hope, however the chances of winning are extremely small.

You might think that there was nothing to lose because you could always get a withdrawal form to cash-in and get your money back; however, the money you get back is devalued money. In an inflationary climate, money is devalued very quickly, and those with a large amount have the most to lose.

ERNIE

The WWII code breaker team using valve technology built the first Electronic Random Number Indicator Equipment (ERNIE), and consequently it was the size of a double-decker bus. Although the hardware has improved through subsequent technologies, the “process” or software has not changed.

To make sure that the numbers generated are truly random, the Government Actuary’s Department (GAD) verifies them to make sure they are truly random. They make sure that the random numbers are truly random using statistical analysis!

Wherever there is money and people, there is corruption and prejudice. I am of an age where I no longer believe in Father Christmas, so when someone tells me something is fair I have to question it. I have always wanted to know, what if the machine came up with a name they did not like, or some long foreign name. I suppose there is the facility to switch OFF the machine and start it again to look for another random name. Could such a thing happen? You could say that the system is random but does not favour certain groups of people. How does GAD prevent this from happening? Who knows?

The Unluckiest Numbers

If you want to know what the most unluckiest numbers are, then I have them right here. The unluckiest numbers begin with the following sequence: 124XA, 100SY, 131VY, 135ML, 178JD, 185BM, 208ED, 243CG, 250FA, and 274FD. I have had these for decades passed down from generations through either my own investment or inheritance. So far, I have not won any life changing amounts, and I do not hope to ever win either. Each £25 won is an additional nail for the coffin, because let us face it, with the way inflation is going most of us will be lucky to even afford one.

A Visit from Agent Million

If you win the first prize, expect to get a visit from Agent Million, who will give you the good news that you have won. So far, I have not had any visits from any agents, no agent Smith, no Agent Orange, and definitely no Agent Million, though I am hopeful.

How to Buy Premium Bonds

In the old days, you had to line up at the post-office and hand over the application form with the money. Recently they have modernised the purchasing system, and now you can buy these online using your credit card, and even by direct debit through the bank. The system usually holds your bonds for one full calendar month before entering them into the draw. If you buy them in the middle of January, then they would be eligible for the lottery from 1st March.

Have I Won?

The winners usually receive automatic notification on the first working day of the month. The Premium Bond prize checker is an online website where people may enter their holder number to check if they won anything. However, before you enter your holder number make sure that the site is genuine, and that the address has https at the beginning.

However, my recommendation would be not to bother because you will be extremely disappointed every month. It is probably better to forget about it and not expect anything. Many people who win do so after they are dead, therefore it might be a good idea to buy it for your family. Whenever I check, I get the usual:

Sorry you haven't won in the draw. Don’t worry, your Bonds will automatically remain in the draw until you cash them in, so you'll have new chances to win every month. See below to find out how to increase your chances of winning.

Of course, it is common sense that to increase your chances, you have to buy more bonds up to the 30,000 limit.

Wills

Paragraph 109 of the terms and conditions state the following:

In the event of the death of a Bond holder, the Director reserves the right to make any payment in respect of the bond in accordance with the law of the place in which the Bond holder resided or, if different, was domiciled at the date of their death.

In UK, the wealth of the deceased usually goes to the next of kin. Therefore, many people leave Bonds in their wills, which is extremely depressing, and it is equally depressing if a person dies without a will, because then you may have to pay a solicitor to recover the money through a grant of probate. Usually if it is a small amount, it may not be worth recovering because solicitors are expensive these days. Thousands of people fall into this category, which is why there are so many unclaimed prizes.

My granddad was always a very hopeful chap; for one thing, he absolutely loved Harold Macmillan. The death of any holder is awful, because it signifies lost dreams and hopes. To know that a person died in hope waiting to win is probably the most depressing.

Unclaimed Prizes

In July 2014, there were over one million unclaimed Premium Bond prizes worth more than £50 million pounds. This is a good indication that majority of the people who won gave up waiting for this prize. Although a small proportion of this is due to change of address, a large number of winners will likely be deceased, and their bonds forgotten or lost.

Premium Bonds + Funeral Service

I believe premium bonds should be linked with the Co Op Funeral Services; we could then have a system where everyone saves money for their funeral as well. Whilst they are alive, they have the opportunity to win a million pounds, however, after they die, the money goes towards their funeral.

Since so many people die without winning, or leaving a will, there should be a box to tick on the Premium Bonds form indicating what should happen to the money after death of holder. The holder can choose to have the money transferred to a named person, or spent on funeral services, or perhaps both where a certain amount goes towards the funeral and the remainder transferred to another person as a gift.

If they added some more valves to their computer, it is also possible to link the computer at the birth and death registry office with the NS&I computer. This way, they would receive automatic notification of death of holder. They could then have another agent, perhaps Agent Grim, to visit the named person on the form, for returning the remainder of the money.

Instead of making plans on spending the winnings, I suggest making plans on leaving them in your will, because a vast majority of people will not win anything, and usually most people leave these as a gift to their family after death.

I was just recently at my local post-office and there was a German woman at the front of the queue screaming, “cash-in deceased!” and nobody knew what she meant until I stepped in to explain for her. It is awful because the person has to deal with the bereavement as well as the legal side of recovering the money.

Milionaire

If you are a millionaire, you could leave them to your brat children who will only buy more drugs and alcohol with it. Instead, why not send it to me at least my homeless cats will eat.

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