WIN WHILE YOU SAVE The history of Premium Bonds

Do you own any Premium Bonds?

More than 21 million of us own at least one, and their history dates back to the 19th century.

By 1861 the British Empire was wealthy, but ordinary citizens were not. They had little opportunity to save. A Huddersfield banker called Charles Sikes wanted to change this. He proposed a scheme to the Chancellor of the Exchequer, William Gladstone. Gladstone approved and decided there should be a savings bank within "... an hour's walk of every working man's fireside.”.

The Post Office Savings Bank was established to provide cheap funding to the Government, and the Ordinary Savings Account was born. Because the Government secured the funds, people felt it was a safe way to invest, so the project was a success, with 2500 branches opening within two years.

During the First World War, the Government needed to borrow more money, so in 1916 it launched War Savings Certificates in 1916 and followed those with National War Bonds in 1917. These raised £433m (around £24 billion based on today's values).

During the Second World War, there was a similar National Savings campaign and deposits rose from £509m to £1,982m between 1939 and 1946.

After the war, the Government wanted to encourage people to save again, and on November 1st 1956, Premium Savings Bonds went on sale. These didn’t earn interest; instead, each £1 bond received a unique number and had an equal chance to win a prize in a monthly draw. £5 million worth of bonds were sold on the first day (about £121 million today).

So that each £1 bond had an equal chance of winning a prize, the draw needed to be truly random. Because of the complexity of the task, the Government used the team behind the Second World War code-breaker, Colossus, to build a piece

By Jamie Maxfield

of Electronic Random Number Indicator Equipment dubbed ERNIE. This machine generated bond numbers based on the signal noise created by gas neon diodes. The original ERNIE was the size of a van and took ten days to complete a draw. Over the past several decades, ERNIE has been through several iterations. The current machine is ERNIE 5, which was introduced in 2019. ERNIE 5 is powered by quantum technology which uses light rather than thermal noise to generate random numbers and takes just 12 minutes to complete a draw.

Back in 1956, you had to own a bond for six months to be entered into the draw; now, it's one full calendar month. Initially, you could only invest £500 maximum, and the biggest prize was £1000. In a time when the average weekly pay was £10 per week, and average house prices were just under £2000, it must have seemed like a huge sum.

Today, you can hold up to £50,000 worth of Premium Bonds, and the maximum prize is £1 million with two chances to win the jackpot each month. There are also many smaller prizes down to a modest £25. 82 billion bonds go into the draw each month, so the odds of any individual bond winning a prize (no matter how small) is 24500 to 1. More than £350 000 of bonds from 1956 are still active today and eligible for entry into the monthly draw.

Believe it or not, even in the present economic climate, there are currently over 1.6 million prizes worth more than £63 million which have not been claimed. Perhaps now might be a good time to check to see whether you have any old Premium Bonds in your name which have been forgotten about. You might get lucky!

Please note, before making any financial decisions, you are advised to consult a professional financial adviser.

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