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Ernie's word is as good as his Bond.

Byline: By Jane Hall

Barely a month passes when Carol Morrison doesn't receive a cheque in the post. The sums may not be huge - normally pounds 50 or pounds 100 - but for Carol they are welcome additions to her income.

The 37-year-old has received hundreds of pounds in this way over the past four years and is hopeful that one day she will really hit the jackpot.

Carol is one of the 774,000 North-East people who have invested a total of pounds 565m in Premium Bonds.

She started to sink her spare cash into them when interest rates began dropping.

"Like most people I had a few Premium Bonds dating back to the 1960s which I had been given as christening presents and the like. But four years ago I decided to invest more heavily in them as the savings rates being offered by the banks and building societies are piddling.

"My mum and dad have also invested in Premium Bonds and we have a competition every month to see who wins the most money.

"I get a real thrill when I see the envelope drop through the letterbox."

Carol recently had to sell half her Premium Bond holding when she moved to her new home in Cramlington, Northumberland. But next month she hopes to plough some more cash back into the prize draw scheme.

"I was really annoyed when I had to sell some of my stock as it cuts down your chance of winning. It was really easy to get back my money, however. All I had to do was fill in a form and a week later I had the cash. I do have some money in a high street account for emergencies, but I don't see the point of leaving the bulk of my savings there.

"With Premium Bonds it's a win-win situation. And there is, of course, always that chance you will win the big one."

A growing number of people hit by both the lowest interest rates for five decades and an uncertain stock market, are following in Carol's footsteps and putting their faith in Blackpool-based Ernie (Electronic Random Number Indicator equipment) - which has been picking the winning for nearly 47 years.

Investors have poured a staggering pounds 2bn into Premium Bonds so far this year. According to National Savings and Investments (NS&I) - the Treasury's retail bank - sales have been averaging around pounds 550m per month since the turn of the year, compared with a monthly average of pounds 334m over the same period in 2002.

It is expected the total invested will burst through the pounds 20bn barrier by the end of the month as sales surge following NS&I's recent decision to raise the maximum holding per person from pounds 20,000 to pounds 30,000 - the first increase in a decade.

The attraction of Premium Bonds in obvious, they are a risk-free gamble. Not only do they offer the chance to win a tax-free sum every month of between pounds 50 and pounds 1m, but they can be cashed in at any time and have 100pc capital security because they are backed by the Treasury.

And with meagre returns on bank and building society accounts, the "opportunity cost" of holding Premium Bonds - that is, the interest that could have been earned had the money been put on deposit - is negligible. As prizes are tax-free, they are particularly attractive for higher rate taxpayers.

Gill Cattanach, NS&I's commercial director, describes Premium Bonds as "one of Britain's financial services success stories."

Despite an inauspicious start in 1956 - there was opposition to them from MPs and the Church - Premium Bonds and Ernie have become a much-loved institution.

As Gill says: "The combination of 100pc security that National Savings and Investments offers and the chance to win some of the hundreds of thousands of tax-free prizes we give away every month, including the prospect of winning the pounds 1m monthly jackpot, means Premium Bonds have captured the imagination of British savers and investors and are extremely popular and in great demand.

"Many of the 350,000 customers who currently have the maximum holding of pounds 20,000 have asked us to increase the limit on the amount they can invest and say they would invest more if the maximum was higher, and I am delighted that customers will now be able to do so."

Each and every Premium Bond entered into the draw has an equal chance of being chosen. But while the maximum you can invest has been raised, the odds on winning a prize have lengthened.

From June 1 the prize rate - how much of the amount invested that is paid out - is to be reduced from 2.4pc to 2.25pc (equivalent to 2.81pc for a basic rate tax-payer and 3.75pc for a higher rate tax-payer.) This means the odds on winning have gone from 28,500-1 to 30,000-1.

Those investors who currently hold pounds 20,000 pounds 1 bonds have an average chance of winning eight times a year.

But a maximum holding of pounds 30,000 would give them an average chance of winning 12 tax-free prizes of anything from pounds 50 to the pounds 1m jackpot.

Of course, there is no guarantee that any bondholder will win any prizes. Many have complained that Ernie seems to favour the South.

But NS&I insists he is scrupulously neutral and while it is true that more prizes go to the south of England, this is simply because more Premium Bonds are held by people who live there. Bondholders are notified automatically when they win a prize. But inevitably people move - sometimes without giving NS&I a forwarding address - and more than pounds 21m in prizes is currently unclaimed, including one for pounds 25,000. NS&I believes the winner may have emigrated to Canada, and to date all efforts to trace him or her have failed.

Unlike the National Lottery, however, which has a cut-off point for claiming a prize, there is no time limit with Premium Bonds.

There are various ways of checking if you have won a prize, including writing to NS&I at Blackpool or checking the supplements to the London Gazette, available from major Post Offices. A quicker and easier way to see if you are in luck is to go to the NS&I website at where you can key your Premium Bondholder's number into a special search engine.

The Premium Bonds prize draw list is normally updated by the third working day of every month. Most of the unclaimed prizes are small, but they can still prove a pleasant surprise.

* Premium Bonds can be bought either by completing an application form available at any Post Office branch and buying them over the counter, or posting to NS&I; by downloading an application form from the NS&I website at or by calling (0845) 964-5000.
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 2003 Gale, Cengage Learning. All rights reserved.

Article Details
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Title Annotation:Business
Publication:The Journal (Newcastle, England)
Date:May 27, 2003
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