Premium bonds are certainly popular, with many people regarding them as a safe way to gamble, says journalist and premium bonds holder Maria McCarthy. But are they worth it?
Who wants to be a millionaire? I do! But as I'm hopeless at quizzes and don't earn a fortune I've only got one chance – my premium bonds coming up.
I've only got £500 in premium bonds - the minimum purchase is £100 and the maximum you're allowed to have is £30,000 - but it means I'm in with a chance of scoring the top prize of £1m.
There are other prizes drawn each month, ranging from £25 up to more significant sums of £1,000, £25,000 and £100,000 – any of which I'd welcome.
Odds of winning
But I have to admit that despite the fact I've had my bonds for five years I haven't actually won anything yet.
This isn't so surprising when you consider that the odds in November 2012 of winning the top £1m prize is one in 441.65 million if you hold £100 worth of premium bonds.
Although these odds fall to a - much more reasonable in comparison - one in 240 chance of winning any prize.
How it works
Premium bonds are run by National Savings and Investments (NS&I) and backed by the government.
They don't earn interest as other savings products do.
Instead, a monthly prize pot is generated from interest paid on the total amount invested in premium bonds - 1.5 per cent from October 2009.
This is divided up among winners who are selected by a machine nicknamed ERNIE (Electronic Random Number Indicator Equipment).
The scheme was set up in 1956 and the top prize then was £1,000.
A safe way to gamble
Anna Bowes of savings website Savings Champion says the appeal of premium bonds is that it's like gambling but without losing your capital.
Bowes adds: "Basic rate taxpayers opening a new instant access savings account would get about 2 per cent interest after tax at the moment – so that's £2 a year on each £100.
"So your £500 in premium bonds could be earning £10 a year interest for you.
"However, there's no tax on premium bond winnings, and that appeals to many people, especially higher-rate taxpayers who might only earn 1.5 per cent on their instant access savings after tax."
Lady Luck
Now, I know my chance of winning the jackpot is slim and that inflation - the measure of how much prices have increased in the past year - is taking its toll and that I'm missing out on interest on my savings.
But I still enjoy having my premium bonds.
I don't like doing the lottery as it's so depressing to check my numbers and realise I've not won anything.
But my premium bonds can just sit there quietly and it's like having a door open in case Lady Luck chooses to visit.
Continuing popularity
And I'm not the only one who feels this way - premium bonds are NS&I's most popular savings product.
As of October 2012, around 22 million customers have premium bonds which are worth more than £43 billion in total.
"People like the fact they're 100 per cent secure and that winnings are tax-free", says NS&I spokesman Chris Dowsett.
"If anyone is concerned that they might have mislaid premium bonds, we have a tracing service to help you track them down.
"We're trying to encourage more people to sign up online so we don't lose contact if they move house and are always able to notify them of prizes promptly."
What do you think?
Do you have premium bonds and have you ever enjoyed a big win?
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