Chance of winning with Prize Bonds slumps

Savers plough into prize bonds but figures show that potential winnings have become less frequent

In a low interest rate environment, prize bonds are also offering lower potential returns.

In a low interest rate environment, prize bonds are also offering lower potential returns.

 

Savers may struggle to beat historically low interest rates by putting their money into prize bonds, with latest figures showing a slump in both the value, and number, of prizes awarded last year.

According to figures published in the latest annual report, Irish savers spent €567 million on prize bonds last year, the second highest level in history, and second only to 2016, when some €670 million was spent. This means that the total invested in prize bonds reached a record high of €3.17 billion last year, the highest level in the scheme’s history, and up by over 9.5 per cent on 2016.The number of savers has also increased, up from 2.93 million in 2016 to 2.94 million in 2017.

In a rock bottom interest rate environment, savers are likely to be attracted by the possibilities of winning a prize of between €50 and €1 million, as opposed to earning less than 0.5 per cent on deposit.

However, while sales might be buoyant, the returns are very much diminishing.

The report shows that while some 302,064 prizes were won in 2017, this is down by 23 per cent on 2016. Moreover, the value of prizes amounted to just € 21.3 million, down from €28 million in 2016, although given the lower number of winners, the average prize fell by just 1 per cent to €70.51. Contrast this with 2012, when some € 46 million was paid out in 438,682 prizes.

Like deposit accounts, prize bonds are also impacted by the low interest rate environment, and the fall in winnings is down to a reduction of more than 40 per cent in the interest rate used to calculate the Prize Fund, and the structure of the prize draw, in mid-2017. Up until July 2017, the amount of cash prizes available was based on 0.85 per cent of the overall prize bond fund, while back in 2016 it was as high as 1.25 per cent. However, it subsequently dropped to 0.5 per cent, which means for example,

The structure of the prize draw also changed last year, which means fewer prizes overall, as well as fewer big money prizes.

Currently, over 4,000 prizes are issued weekly and the million-euro prize draw takes place twice a year, in June and December. In 2016 however, there were over 7,000 prizes issued weekly while the million euro draw took place four times a year.

Prize bonds can be purchased in units of € 6.25, and there is a minimum purchase of four units costing € 25 and a maximum purchase in any single transaction of € 250,000 (or € 500,000 for a couple). Prize Bond winnings are not subject to Dirt or other taxes, which means that even if someone puts € 10,000 into prize bonds and wins just € 50 a year, they will have done better than putting their money in the top paying deposit account (0.75%).