Lottery or Premium Bonds?
Lottery games give players a fairly passive way to try and win a fortune. Assuming that you are of legal age to play, they require nothing more than the ability to complete the entry form, hand over your money and check your numbers after the draw has taken place.
It is probably the ease of lottery games that make them so popular, but Premium Bonds are often heralded as an alternative because they also give you a chance to win a life-changing amount of money, and they also allow you to get your money back if you don't win. It sounds like a great deal, but are they really superior to lotteries? I decided to sit down and assess the pros and cons...
About Premium Bonds
If you watch UK television then you may have seen the commercials in which Alan Sugar telling us how good Premium Bonds are. Premium Bonds are an investment which, instead of paying interest, enter the bond holder into a monthly prize draw. There are usually two top prizes of £1 million each month, and nine lower tiers of prizes that go down to a minimum prize of £50.
Advantages
The main advantage of Premium Bonds is that, because they are investments, you can get your money back. For example, if you invest £100 in Premium Bonds and you decide six months or a year later that they aren't for you, you can sell your bonds back to the government and get your £100 back. Apart from the depreciation of your investment over time against inflation, Premium Bonds are effectively risk free.
A second advantage is that your bonds are entered into every monthly draw no matter how long you hold them. If you buy a Premium Bond and keep it for five years then that Bond will be entered into every monthly draw for the full five years. This compares well with the single-draw lifetime of the average lottery ticket.
A third advantage is that you don't need to worry about checking your numbers. As long as you notify National Savings and Investments about any change in your address they will automatically notify you of any prize that you win, and if you wish they can use the prize money to increase the number of Premium Bonds you hold. The maximum amount you can have invested in Premium Bonds is £30,000.
It all sounds rather good, but there are disadvantages to Premium Bonds that are not immediately apparent to the casual observer.
Disadvantages
The first disadvantage of Premium Bonds is that you need to invest a minimum of £100. This immediately makes them impractical for many National Lottery players who can only afford a pound or two on a weekly ticket.
A second disadvantage is that the odds of winning any prize are not as good as with the National Lottery. The precise odds vary vary each month according to the number of bonds that are held compared with the number of prizes available, but you can generally expect 1 in 24,000 Premium Bonds to win a prize. The maximum prize is £1 million and the minimum prize is £50, so I will let you decide if that is more appealing than the 1 in 57 chance of winning £10 or the 1 in 13,983,816 or winning the multi-million pound jackpot in the Lotto.
A third disadvantage of Premium Bonds is that they don't incorporate any element of fun. This is because Premium Bonds are investments, not a game, and so entertainment isn't part of the deal. You still get to anticipate winning a potential fortune, of course, but you won't get the satisfaction of watching numbers being drawn live on television.
Conclusion
Whilst Premium Bonds are undoubtedly attractive investments, they don't offer us anything close to the excitement and multi-million pound potential of National Lottery games. I think that investing a couple of hundred pounds in bonds might be a good move for many people, but for me personally nothing can compare with the buzz and excitement of National Lottery games.
Article Last Updated: 29/05/2007 13:58:29
