Prize bond sales rise by 95%

NERVOUSNESS ABOUT the safety of bank deposits last year pushed sales of prize bonds to their highest ever level, the company behind the bonds said yesterday.

Gross sales of the State savings product surged 95 per cent to €279 million in 2008, while encashments of the bonds increased by less than 1 per cent to €104 million.

This gave the Prize Bond Company net sales of €175 million, up 336 per cent on the €40 million in net sales recorded the previous year.

Almost half of the sales in 2008 occurred in September and October last year, the time when concerns about security of the Irish banking system forced the Government to offer a full State guarantee on deposits at Irish financial institutions.

The average purchase value also soared to €1,045, up from €587 the year before, as savers sought to find a safe haven for their nest eggs.

The Prize Bond Company, a joint venture between An Post and Fexco, said sales began to revert to normal levels in November and December.

Sales in the first quarter of 2009 continue to be very strong, the company said, reflecting the national trend for increased household savings during a time of economic uncertainty.

Gross sales in the first quarter were €101 million and were partly driven by a €1 million jackpot prize.

“The savings trend is continuing in line with the Central Bank’s prediction of increased precautionary savings by consumers,” said Prize Bond Company chairman Michael O’Keeffe.

Instead of being paid interest, bond holders are put in a weekly draw to win cash prizes. In 2008, prizes totalling more than €20 million were awarded, up 27 per cent on 2007.

The total value of prizes awarded grew in line with the investment base. The fund value at the end of the year was €803.5 million, up 27 per cent on 2007.

The surge in sales appears to suggest that the Government’s decision to guarantee bank deposits failed to alleviate the concerns of all savers. Anecdotal evidence suggests that the number of under-the-mattress or “biscuit tin” savers also increased last year.