The 'squalid raffle' that has drawn 23 million investors

Harold Wilson called it a "squalid raffle". Dr Geoffrey Fisher, then the Archbishop of Canterbury, said it was "a cold, solitary, mechanical, uncompanionable, inhuman activity".

When the Lord Mayor of London bought the first Premium Bond, 50 years ago tomorrow, on 1 November 1956, it was in the face of criticism that continues to be levelled at the scheme today. Initially, the controversy focused on the fact that the Government was appearing to sanction gambling.

Announcing his plan for Premium Bonds in the April 1956 Budget, the then-Chancellor, Harold MacMillan, claimed the scheme would encourage saving and help control inflation.

But the Labour opposition under Mr Wilson, backed by church groups, attacked the morality of the monthly draws. Two Post Office workers even refused to sell Premium Bonds on religious grounds.

In more recent times, attacks on Premium Bonds have focused on the value for money that the scheme offers. A saver who holds the maximum £30,000 of bonds could, on average, today expect to win prizes worth the equivalent of an annual return of just 3.15 per cent.

Lisa Taylor, head of savings at independent analyst Moneyfacts, says this is uncompetitive. "The average return is much lower than the return you could earn from the best instant access savings accounts, which currently guarantee more than 5 per cent a year," she warns.

Premium Bond prizes are at least tax-free, which boosts the effective average return to about 5 per cent for higher-rate taxpayers. But Ms Taylor counters: "The return isn't certain and anyway, the average figure is slanted by the large prizes, which you're much less likely to win."

The immediate success of Premium Bonds followed a publicity campaign that caught the public imagination. By the time of the first draw in June 1957, 49 million bonds had been sold and more than 23,000 prizes were on offer - a 2,095-to-one chance of winning. Among the 96 winners of the £1,000 top prizes, five had bought just one £1 bond.

Ernie - electronic random number indicator equipment - the computer that processed the prize draw, was a particular success. The first machine was invented by a Second World War code breaker, Tom Flowers, and was the size of a small bus. It has subsequently been replaced three times and the latest incarnation is roughly the size of a DVD player.

The scheme expanded throughout the Sixties and Seventies, with the winning numbers announced on television each week by stars ranging from Bruce Forsyth to Bob Hope. The top prize was raised to £50,000 in 1971 and then to £250,000 in 1980.

By 1988, 2.2 billion Premium Bonds were in circulation, but sales began to slow. One problem was that the scheme was ultimately a way for the Treasury to supplement Government borrowing, for which the need rose and fell.

"Our remit is to raise funding for the Government at a cheaper rate than in the gilts market," says Dax Hawkins, senior savings strategist at National Savings & Investments, the organisation that now runs the Premium Bonds scheme.

"In the past, we've been something of a hostage to fortune - there were times when the Treasury didn't want us to raise money and our profile and prize money reflected that."

Another threat emerged in the early Nineties, with the announcement of the state-sanctioned National Lottery. In 1994, to counter the threat of the new draw, which captured the television slots vacated by Premium Bonds some 10 years earlier, National Savings revamped the scheme. It raised the minimum purchase to £100 and introduced a top prize of £1m.

Sales immediately doubled. "People thought the Lottery would have an adverse effect on us," says Mr Hawkins. "In fact, the impact has been positive, because people began to appreciate the fact that you never lose your stake with Premium Bonds."

A second overhaul of Premium Bonds in 2002 boosted sales further. A marketing drive saw National Savings offering sales online and by phone. More Premium Bonds have been sold in the past five years than in the previous 45.

Susan Hannums, head of savings at independent financial adviser AWD Chase de Vere, thinks the most recent success of the scheme reflects savers' investment fatigue. "Many savers now think there is a better chance of winning money than there is of making it from saving and investing," she says.

Yet the criticism continues. "Premium Bonds should be a bit of fun and no more than that," says Ms Hannums. "From any sensible point of view, this is not a decent investment."

Premium Bonds by numbers

* 3 hours Amount of time Ernie takes to process the monthly prize draw.

* £1m The top Premium Bond prize - two jackpots are awarded each month.

* 6 Number of extra £1m jackpots on offer in December and January, to mark the 50th anniversary of Premium Bonds.

* £1,000 Top prize in 1957, the price of a brand new Ford Zephyr.

* £25,000 The largest single prize that has still not been claimed.

* 15 Number of prizes the average Premium Bond holder should win each year if he or she has the maximum holding of £30,000.

* £17 Size of the smallest holding ever to win the £1m jackpot.

* 24,000 to 1 Odds of a single £1 Premium Bond winning a prize today.

* £145,000 Amount invested in Premium Bonds every minute.

* 12 per cent Premium Bonds' share of the instant access savings market.

* 10 million Number of savers who have held their Premium Bonds for more than 10 years.

voicesGood for Lana Del Rey for helping kill that myth, writes Grace Dent
The University of California study monitored the reaction of 36 dogs
sciencePets' range of emotions revealed
Life and Style
fashion Designs are part of feminist art project by a British student
Arts and Entertainment
The nomination of 'The Wake' by Paul Kingsnorth has caused a stir
Arts and Entertainment
The Tour de France peloton rides over a bridge on the Grinton Moor, Yorkshire, earlier this month
Snoop Dogg pictured at The Hollywood Reporter Nominees' Night in February, 2013
people... says Snoop Dogg
Life and Style
food + drinkZebra meat is exotic and lean - but does it taste good?
Arts and Entertainment
Residents of Derby Road in Southampton oppose filming of Channel 4 documentary Immigration Street in their community
voicesSiobhan Norton on why she eventually changed her mind
Scottish singer Susan Boyle will perform at the Commonwealth Games opening ceremony in Glasgow
commonwealth games
Arts and Entertainment
Dwayne 'The Rock' Johnson stars in Hercules
filmReview: The Rock is a muscular Davy Crockett in this preposterous film, says Geoffrey Macnab
Life and Style
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    PMO Analyst - London - Banking - £350 - £400

    £350 - £400 per day: Orgtel: PMO Analyst - Banking - London - £350 -£400 per d...

    Cost Reporting-MI Packs-Edinburgh-Bank-£350/day

    £300 - £350 per day + competitive: Orgtel: Cost Reporting Manager - MI Packs -...

    Insight Analyst – Permanent – Up to £40k – North London

    £35000 - £40000 Per Annum plus 23 days holiday and pension scheme: Clearwater ...

    Test Lead - London - Investment Banking

    £475 - £525 per day: Orgtel: Test Lead, London, Investment Banking, Technical ...

    Day In a Page

    Noel Fielding's 'Luxury Comedy': A land of the outright bizarre

    Noel Fielding's 'Luxury Comedy'

    A land of the outright bizarre
    What are the worst 'Word Crimes'?

    What are the worst 'Word Crimes'?

    ‘Weird Al’ Yankovic's latest video is an ode to good grammar. But what do The Independent’s experts think he’s missed out?
    Can Secret Cinema sell 80,000 'Back to the Future' tickets?

    The worst kept secret in cinema

    A cult movie event aims to immerse audiences of 80,000 in ‘Back to the Future’. But has it lost its magic?
    Facebook: The new hatched, matched and dispatched

    The new hatched, matched and dispatched

    Family events used to be marked in the personal columns. But now Facebook has usurped the ‘Births, Deaths and Marriages’ announcements
    Why do we have blood types?

    Are you my type?

    All of us have one but probably never wondered why. Yet even now, a century after blood types were discovered, it’s a matter of debate what they’re for
    Honesty box hotels: You decide how much you pay

    Honesty box hotels

    Five hotels in Paris now allow guests to pay only what they think their stay was worth. It seems fraught with financial risk, but the honesty policy has its benefit
    Commonwealth Games 2014: Why weight of pressure rests easy on Michael Jamieson’s shoulders

    Michael Jamieson: Why weight of pressure rests easy on his shoulders

    The Scottish swimmer is ready for ‘the biggest race of my life’ at the Commonwealth Games
    Some are reformed drug addicts. Some are single mums. All are on benefits. But now these so-called 'scroungers’ are fighting back

    The 'scroungers’ fight back

    The welfare claimants battling to alter stereotypes
    Amazing video shows Nasa 'flame extinguishment experiment' in action

    Fireballs in space

    Amazing video shows Nasa's 'flame extinguishment experiment' in action
    A Bible for billionaires

    A Bible for billionaires

    Find out why America's richest men are reading John Brookes
    Paranoid parenting is on the rise - and our children are suffering because of it

    Paranoid parenting is on the rise

    And our children are suffering because of it
    For sale: Island where the Magna Carta was sealed

    Magna Carta Island goes on sale

    Yours for a cool £4m
    Phone hacking scandal special report: The slide into crime at the 'News of the World'

    The hacker's tale: the slide into crime at the 'News of the World'

    Glenn Mulcaire was jailed for six months for intercepting phone messages. James Hanning tells his story in a new book. This is an extract
    We flinch, but there are degrees of paedophilia

    We flinch, but there are degrees of paedophilia

    Child abusers are not all the same, yet the idea of treating them differently in relation to the severity of their crimes has somehow become controversial
    The truth about conspiracy theories is that some require considering

    The truth about conspiracy theories is that some require considering

    For instance, did Isis kill the Israeli teenagers to trigger a war, asks Patrick Cockburn