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Later on this month will sees the fiftieth anniversary of the birth of Premium Bonds. On 17 April 1956 the then chancellor, Harold Macmillan, unveiled plans for a new state saving scheme. The idea was completely revolutionary, though not without controversy -- instead of receiving interest on their savings investors were awarded cash prizes. Needless to say, not everyone approved of the scheme, which was designed to encourage more people to save money. Amongst those who pooh-poohed the idea was Shadow Chancellor Harold Wilson. He urged Macmillan to examine the radical proposal as part of the Government's bill on gambling and betting. The Church's Committee opposed the idea of Premium Bonds, too. The Rev J Clarke Gibson rejected the plan on the grounds that Premium Bonds constitute as a gamble because prizes are distributed by chance. He argued that the gains of the few are at the loss of the whole body of investors whether they want to gamble or not. Despite the objections the first Premium Bond was sold on 1 November 1956 to Alderman Sir Cuthbert Ackroyd who later became Lord Mayor of London. And by the first day £5m were sold. Demand for Premium Bonds continued even though the top prize was a mere £1,000, which is equivalent to around £11,000 today. And by the time the first draw took place on 1 June 1957, some £82m had been invested. Since drawing the winning Premium Bonds by hand was impractical, the Post Office Research Station, which built the first electronic computer Colossus, was commissioned to design a random number generator. The first Electronic Random Number Indicator Equipment, or ERNIE, was unveiled in 1957, and it was wheeled out four times a year to generate winning bond numbers. But as the popularity of Premium Bonds grew the valve-driven ERNIE, which could only churn out 2,000 numbers an hour, outlived its usefulness. So after three upgrades, today's ERNIE 4 is reckoned to be some 500 times faster than the original. It can generate around one million Premium Bond numbers an hour, and complete a monthly draw in about two and half hours. In time even faster ERNIEs may be needed given the explosive growth in demand for Premium Bonds. The amount of bonds in existence has risen from £4bn in 1994 to over £26bn in March 2005. Contrary to popular misconception, the numbers generated by ERNIE are completely random. Some people genuinely believe that newer Bonds have a better chance of winning. But the truth is there are simply more new bonds in existence than old ones. For instance, since the £1m jackpot was introduced in 1994, more bonds have been sold in the subsequent 12 years than in the preceding 37 years put together. Without question, Premium Bonds are one of the safest investments around. After all, they're backed by the British Government, which means you can get your money back in full whenever you want. Additionally, even if you don't land the big prize you should still generate a return of around 3% a year with what is known as 'average luck'. However, the downside is the return is less than the interest you get by investing in the highest paying savings accounts, and a lot worse over the long-term returns you can expect to get from the stock market. But you didn't expect a win-win proposition when you're gambling risk-free for £1m did you? In my experience there are no known games of chance that favour the punter over the operator -- and that includes Premium Bonds! > Fancy Becoming A Millionaire? | Premium Bonds discussion board
