How the smart money is going back into Premium Bonds

Punters have realised that the odds on a big win are far shorter than on the Lottery, reports Graham Ball

FORGET Lottery mania: Britain's smartest punters are putting their money on a much better bet. Figures due to be released later this month will show that Premium Bonds, for years a dowdy Cinderella among a host of more glamorous savings products, is now a hot number in the race to win a million.

Sales of National Savings Premium Bonds for 1995 are expected to come to around pounds 1.78bn, nearly 300 per cent up on the figure for two years earlier. The reason for the dramatic and sustained surge of interest in this form of speculative saving is the knock-on effect of the National Lottery.

"Every time there is another burst of publicity about the Lottery, we benefit,'' said Patrick Hickman Robertson, National Savings head of policy. "People have woken up to the fact that you can win a million without sacrificing your stake money. The amount of money going into Premium Bonds is going up and up. We have sold more than pounds 3,000m worth since April 1994, more than our total sales for the previous 10 years and there is no sign of that support flatting.''

There are a number of reasons why Premium Bonds are now so attractive, but chief among them is the prescient decision taken at the start of 1994 to increase the monthly prize from pounds 250,000 to the magic pounds 1m.

"Not only is your stake money at no risk, you also stand a far better statistical chance of winning a million with Premium Bonds compared to the National Lottery,'' said Mr Hickman Robertson.

With Premium Bonds, which is a prize draw and not a lottery, the odds are calculated before each monthly draw to insure that each single bond stands a one in 15,000 chance of winning a cash prize. With the National Lottery each pounds 1 entry stands a one in 14 million chance of scooping the jackpot. "This means that an individual with the maximum permitted Premium Bond holding of pounds 20,000 stands a 291,000 to one chance of winning pounds 1m each month," said Mr Hickman Robertson. "You don't have to be a mathematician to see that this makes a very favourable comparison.'' Some 50,000 individuals have a pounds 20,000 holding, totalling pounds 1bn out of the pounds 5.8bn in the January draw.

In addition to the top pounds 1m prize the Premium Bond monthly draw offers two pounds 100,000 prizes, three pounds 50,000, four pounds 25,000 and so on down the scale to the point where more than 300,000 can win pounds 50.

"It is clear that the Lottery has helped, although previously we had thought ourselves to be in a different market," said Carys Jones of National Savings. "The minimum purchase of Premium Bonds is pounds 100 which makes them a more considered purchase.''

Low interest rates, easy Post Office counter sales and a money-back promise in eight working days have also helped refurbish Premium Bonds' once-unfashionable image.

They began life in 1957 ,and just like their brash successor provoked waves of moral concern. The then Archbishop of Canterbury, Geoffrey Fisher, spoke in the House of Lords against "debasing the spiritual coinage of the people''. He went on: "The Government knows, as well as the rest of us, that we can regain stability and strength only by the unremitting exercise, all through the nation, of the old fashioned and essential values ... honest work honestly rewarded''.

In 1957 the Premium Bonds top prize was pounds 1,000, equivalent to pounds 12,600 at today's values. Prior to that, most Britons in search of a flutter only had the football pools to fuel their fantasies. To maintain their hold over the once-a-week gamblers the pools companies progressively increased the top prize. In 1950 the biggest payout stood at pounds 80,000. In 1961 the nation boggled at the "Spend, Spend, Spend" antics of Viv Nicholson and her husband Keith following their pounds 152,000 pools jackpot win.

By 1972 the record payment on the football pools stood at pounds 500,000; a syndicate from Wiltshire were the first to collect pounds 1m in April 1986. A 73-year-old man from Gloucestershire holds the record for the highest individual pools payout, having picked up pounds 2.3m in January 1995, while two months earlier 25 shared the biggest-ever pools jackpot win of pounds 2.9m.

That may have been the high water mark for the pools. For the sum paid out is in direct proportion to the numbers playing, and the National Lottery has been blamed for a 20 per cent downturn in pools business. Last August Littlewoods closed a Cardiff processing centre with the loss of 320 jobs. The company's Nick Casey said: "The pools will carry on, although we could do with a bit more government assistance. We're still paying 271/2 per cent betting tax. ''

A professor from the London School of Economics has put the odds against becoming a pools millionaire at 6.5 million to one.

Bingo offers a better deal with a claimed one in a million chance of winning a jackpot. The National Bingo Game, where 650 clubs from all over the country link to play one game has, since last March, offered a top prize of pounds 250,000. They are however restricted in what prize money they can put up by the terms of the 1985 Gaming Act.

John Beard, spokesman for the Bingo Association of Great Britain, said: "The government has promised a consultative document which should pave the way toward deregulation, but we have been waiting for eight months, and in the meantime the National Lottery is taking its toll. We've been particularly hard hit by the scratch cards. Thirty-five bingo clubs have been forced to close in the last six months.''

There is, in fact, only one real winner: the Government. In the year 1993-94 the Exchequer took its cut from pounds 811m worth of bingo stake money and every day the National Lottery moves closer to funding large areas of what used to be public responsibility in the field of the arts, leisure and welfare.

Perhaps Henry Fielding, the 18th century novelist and author of Tom Jones, had it right in his satirical rhyme:

"A lottery is a taxation

Upon all the fools in creation

And Heav'n be praised

It is easily rais'd''

Small ticket with a big impact, Business page 5