Why am I paying so much tax on my pension?

What are my chances of a prize bond win?

A recent correspondent refers to “having built up a substantial amount which we currently invest in prize bonds. We get a great return on them versus putting cash on deposit”.

You make no reference to this in your response but I was gobsmacked to learn that anyone could make a “great return” from such an investment. I have been investing in prize bonds for almost 40 years and have not got one cent back. I am wondering does one have to have, say €100,000, in prize bonds to have any chance?

Mr G McL, email

Prize bond draws, like the Lotto, are a matter of chance. On that basis, I would assume that the greater share of the entries you own – in this case the higher number of individual prize bonds – the better your chances of winning a prize in any given draw, or cumulatively over a period.

That’s not to say there are not some attractions to prize bonds. First up, your bond is entered in every weekly draw for as long as you hold it – which, in itself, makes it a better bet that the Lotto – but as with the lottery, you pay no tax on any winnings.

And, if you are of an altruistic bent, there is the satisfaction of knowing that in these times of austerity, you are helping balance the State’s books as the bonds are managed by the National Treasury Management Agency alongside other State savings.

There are more than 8,500 winners each week but then again there are more than 200 million bonds in issue . . .

The other key attraction of the bonds is that they can be redeemed at face value. Of course, no allowance is made for inflation, so you are still effectively losing money in almost all circumstances – unless your bond comes up in a draw.

Ultimately, only in a period of sustained deflation would prize bond purchase be considered a “sensible investment option”, as against a somewhat virtuous punt.

* This column is a reader service and is not intended to replace professional advice. Please send your questions to QA, c/o Dominic Coyle, The Irish Times, 24-28 Tara Street, Dublin 2, or to dcoyle@irishtimes.com.