The name’s bond – premium bond

‘I love a flutter, but I hate that sinking feeling of throwing money down the drain once you’ve outreached yourself, done an Icarus and crashed and burned’

I love a flutter, but I hate that sinking feeling of throwing money down the drain once you’ve outreached yourself, done an Icarus and crashed and burned. Betting on anything other than a raffle at a summer fete makes me feel a bit queasy. Buying lottery tickets, other than at Christmas, gives me that same feeling of guilt and greed as (I can only imagine, obviously) snaffling a whole bar of chocolate at one sitting might. But I’ve always felt that premium bonds were somehow different. There’s something respectable and solid about the way they combine putting something by for a rainy day with the tantalising possibility of a big fat windfall. There’s also something good fairy-like about the way we present them to babies when they are born – hoping that they will use their gift wisely, on health wealth and happiness, not be tempted by the lure of a needle the moment they hit 18 and blow it on a pair of arse antlers.

So when Danny Cox, head of financial planning at investment firm Hargreaves Lansdown, reminded me yesterday that National Savings and Investments have increased the maximum amount people can put into premium bonds from £30,000 to £40,000 and will double the maximum prize from £1M to £2M in August I was straight back to him quizzing him about whether this meant the odds had improved – ie can I put some money into premium bonds and come out with more than crossed fingers, but the smug smile of a canny investor? Well, yes, he said, explaining that Premiums bonds work best for higher-rate taxpayers who already use their ISA allowance and want a secure home for a proportion of their cash.

“Even though there are no prize guarantees, when compared with the rates of interest on offer from taxed savings, which frequently fail to even match inflation, the chance of winning a better return in prizes will appeal to many. 100 per cent security and relative accessibility make premium bonds an attractive alternative to immediate access deposit accounts.”

Can you actually work out the odds though, I asked him.

Danny took less than ten minutes to tippet tap on his calculator and came back with the weirdly reassuring news that actually, on balance, spending money on premium bonds would do as well, if not better than some of the ISAs around. Here’s what he said: “The odds of winning any prize are 26,000 to one. The prize pool is 1.3%, which means someone with average luck would expect to win £130 tax-free for every £10,000 invested over the course of a year. This compares favourably to Tesco’s internet saver paying 1.35% before tax and BM’s Cash ISA at 1.65%.”

No contest! I’m convinced – and to increase my odds even more I’m going to put some of them in Katy’s name – in the last six months she’s won three raffle prizes – a four-foot high meerkat at the school winter fair, a massive Pudsey bear cake at the Children In Need class tea – and last week she walked off with a manicure set and an indoor basketball hoop at my college Diversity Day fair. I’ve had one lone premium bond since I was born and have yet to win so much as a book token’s worth in what must be, ooh, almost 20 years now. I think it’s time my luck changed don’t you?