Monday 25 September 2017

More chance of a lightning strike than Prize Bond win

CELEBRATION: Of course what lotteries really sell is hope
CELEBRATION: Of course what lotteries really sell is hope

Charlie Weston, Personal Finance Editor

THERE is a higher chance of being struck by lightning than winning the prize bonds jackpot.

The odds of any one bond winning the jackpot prize of €1m in any single draw are 300 million to one.

There are better odds of Liverpool winning the Premiership today, or you or your family winning the Lotto next week – or even of being struck by lightning, research carried out for the Sunday Independent shows.

The findings have emerged at a time of record sales of State-issued prize bonds.

This is the month when grandparents often buy the bonds as presents for children making their First Communion and those being Confirmed.

Sales of the bonds shot up by 35 per cent last year to €475m. There is now close to €2bn in total invested in prize bonds, which are sold by the State as a way of raising money.

This is the highest amount of money raised from prize bonds in the 56-year history of the scheme.

The massive spend came despite three cuts in the prize funds in the last year and a half. Last summer, the top €1m prize was changed from once a month to once every second month.

Calculations by finance lecturer and head of wealth management at Dublin-based GoldCore, Marc Westlake, show that for many people their investment is typically too small to expect it to do well over any reasonable time period.

Mr Westlake worked out that the chances of any one bond winning the €1m jackpot prize are 300 million to one. He said the odds of getting struck by lightning were three million to one.

"So, for each bond you are 100 times more likely to get struck by lightning than winning the prize bond jackpot," he said.

Mr Westlake, who was asked to do the calculations by the 'Irish Independent', said that one of the reasons prize bonds were so popular was that few people properly understood the probability of winning.

The chances of winning some of the lower prizes were also slim.

Prize bonds offer a weekly prize of €20,000. The €1m draw happens every two months.

There are also five prizes a week of €1,000, and 250 prizes a week of €100, as well as a much larger number of €50 prizes.

Mr Westlake worked out that, on average, even someone with €100,000 in prize bonds will win only one prize out of every 20,000 prizes.

This means that someone with €100,000 in prize bonds could expect to win a €1,000 prize on average every 77 years.

"They are a bad investment for the typical person who buys them. Parents typically buy them for children, and grandparents buy them for grandchildren making their Communion.

"But for the average man and woman buying prize bonds and expecting to win it is the triumph of optimism over experience, to paraphrase Samuel Johnson," he said.

The prize fund is currently 1.6 per cent of all bonds in issue, he explained. But because of the way the prizes are "skewed" by the small number of large prizes, it is necessary to put in a fairly substantial investment, probably in excess of €10,000, to have a reasonable chance of getting a reasonable return.

The chances of winning the Lotto jackpot are one in eight million, according to the National Lottery, although with prize bonds you can get your stake back.

A spokeswoman for the Prize Bond Company said: "Prize bonds are a unique form of investment. The Prize Bond Company does not make comment on the calculations of the interest on the eligible fund determined by the NTMA (National Treasury Management Agency).

"The number of prizes awarded each week depends on the total size of the Prize Bond fund. It is currently calculated at a variable rate of 1.60 per cent of the fund size per annum."

Why we love our €2bn bonds

Prize bonds are a huge success, with €2bn worth of them now owned by citizens.

They are popular because they are a State investment. This means buying the bonds is supporting the debt-raising needs of the Exchequer, and also means the investment is guaranteed by the State.

Buying prize bonds is a tradition in this country. For generations now, the bonds have been a staple of household savings.

There is a chance of winning a prize – even if the odds are stacked against the bond holders.

Any prize won is tax-free.

The bonds can be cashed in at any time, without notice.

Buying prize bonds is easy. Every post office in the country sells them.

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