The odds against an individual bond winning a prize in each draw are given as 28,500 to 1. The holder of one 1 bond (still possible if acquired before the 100 minimum) can, on average, expect to win once every 2,375 years!

So failing to win within a lifetime should be no surprise. To win once every 25 years, one would need 95 bonds. So the buyer of 100 worth should not expect more than three prizes in a lifetime.

For a holder of the maximum 20,000-worth, the odds against winning in each monthly draw are a much more appealing 1.425 to 1. More often than not, that win will be 50, but the likely frequency of wins (more than eight per year) means that if you can afford to put aside 20,000 for a few months or longer you can expect some visible returns quite quickly, albeit mainly small ones.

When I last held 20k-worth of them, the frequency of wins averaged 12-13 per year, and I did get some 500 and a 1000. But the prize allocation gets varied to match current interest rates. So this week's cut in bank rate might soon bring another slight reduction in the expected return.

It used to be possible to purchase just one bond. Nowadays the minimum is 100. I reckon the best bet is to hold at least half the maximum, so you get to see a few prizes and can dream of the biggie, or to hold just a token few, so you still can dream but don't wastefully tie up capital for something unlikely to happen in your lifetime. The worst option seems to be to hold several hundred or a few thousand, where you stand few chances of winning while alive but tie up money more useful elsewhere.

Edit: Prize fund being adjusted downwards again from June 2003, in line with recent falls in interest rates.

Nice!

Odds lengthening from 1st June from 1:28,500 to 1:30,000 per bond per draw. Notional Interest rate down from 2.4% to 2.25% (tax free, worth 3.75% to 40% tax-payer).

Well i have just bought some more today, although im not usually very lucky with this sort of thing!

Bought some on last day of Feb, so I catch the April Fools Day draw :-o

I won 500 a couple of years back and a few 50 prizes so I like premium bonds as an investment.

Got another 50 this morning

enjoyed reading the life experience...informative thread guys...

They're going to reduce the prize fund again from November 2003 to 2.15% tax-free (worth 3.6% gross to higher rate taxpayers). Odds remain 1:30000 per month and maximum holding 30000 each.

OLDCRAFTSMAN.
Have just cashed my last 5000 Premium Bond to pay for a building extension.
At one time I held 20 grands worth for about 5 years, and the largest win I had
was 100, mostly 50. After carefully calculating the percentage yield, I came
to the conclusion the return would have been better in a Building Society.
My investment is now in higher yielding dividend shares in the Stock Market.

I too cashed in almost all mine and diverted the money elsewhere - using it to take advantage of the upsurge in smallcaps in recent months. These in turn will be sold off as they peak (which many of the less deserving ones are now doing imo), and held ready to make the most of the best short-term upward swings in those few smallcaps that do continue climbing.

Some years ago, I bought 16ks worth. In the first year they did very well - my rate of return was well above the current building society rate. However, in the whole of the 12 months of the second year, I only got two 50 prizes. I found this somewhat odd, and would have thought that the law of averages would have been somewhat fairer than this.

Consequently I sold all but 150s worth. I got a cheque on Friday for 50 on this holding - first for about 5 years - which was a nice surprise.

IMHO, its nice surprises like this that make it worth holding a few quids worth, you are in with a chance for a biggie, and unlike the lottery you do get your money back. I wouldnt myself stash a large amount there at present as it looks as the returns are too uncertain.