Premium Bond and ERNIE

Premium bonds are bonds that do not pay interest. They do something much better. You purchase premium bonds and let it sit just like in a savings account. Each month there is a lottery and if your bond number is picked, then you have a chance to win over a million dollars. Over one and a half million cash prizes are given away each month and if your bond number is picked, you win from fifty British pounds to well over a million pounds. The great thing is if you do not want to participate in the program anymore you can take back your money like it was never invested at all. This program is so popular that over a third of the population of Great Britain participates in it.

Unlike the American lottery system where numbers are picked randomly from ping pong balls, Great Britain uses ERNIE to generate numbers from premium bonds. ERNIE is a random number generator hardware system and has been around since 1957. ERNIE first generated the bond numbers by picking up on signal noise from a bank of neon tubes. It was the size of a mini van and could only generate about 2000 numbers an hour. The first number generator lasted almost seventeen years and was replaced by an updated version in 1972.

The computer age came to age in the eighties and in 1988 ERNIE 3 was invented. The generator was about the size of a personal computer but ran at no where near the speed personal computers run today. It took ERNIE 3 almost six hours to generate the numbers for the monthly lottery. ERNIE 4 is being used today and it came of age in 2004. Working at speeds five hundred times as fast as the original model, ERNIE 4 uses thermal noise instead of the noise from neon lights. It can compute over a million numbers and hour

Once the numbers are generated, a staff of hundreds validates the generated numbers with real bond numbers that the numbers match. Once matched, prizes are allotted to the public. The machine is checked over monthly to ensure proper validation and to keep the system honest. With over a million and a half winners monthly, the machine keeps every thing running smoothly. The investments pay off as winners are awarded their prizes depending on the order that their premium bond number was generated.

ERNIE is so popular in Great Britain that the machine actually receives cards on holidays such as Christmas. Jethro Tull, a poetic singer and song writer even wrote mentions ERNIE in his song, "Thick as a Brick." The magic of ERNIE and the thrill of lottery and a chance to win a million has the majority of the population of Britain investing more and more. The idea that your money can earn more than a mere one or two percent that savings accounts earn has the British public flocking to the bank to let ERNIE make them a million.

What is a Premium Bond?

The United Kingdom has a unique way to insure bonds that is very different than the government bonds you buy from the United States. In the United States you buy a bond and after ten or twenty years the government will pay back the original money invested and add interest. For example a twenty year bond will be yield an interest after the time has passed the bond can be returned for the promise payment. The premium bond that the United Kingdom offers can be redeemable for the exact amount it is purchased for at any time.

The interest accrued goes into a public fund in which is saved. The interest is divided and monthly cash prizes are awarded in a lottery style give away. So the more bonds you buy, the more chances you have to win the cash prize. The cash prize is nothing to laugh about. Translated to American money, the first prize on the bond lottery can be over a million dollars.

There are smaller prizes awarded, so if you are lucky you will receive a huge prize instead of the small percentage the American bond market gives you. Premium bonds add excitement to investing. You don't have to worry about losing your money or waiting a long time to collect the interest. It's like being involved in a lottery without going to the connivance store to buy your tickets each week. You bond is involved in each lottery and you can cash it in and pull it out of the lottery if you need the money or you do not want to be involved anymore.

Unlike the American government bond system where you will not get the interest if you pull out the money before the stated agreed upon time, the premium bond system allows you to have more freedom with your money. You can have a nice savings account and at the same participate in a lottery that can set you up for life. A machine generates the winners and like the American lottery, you can check online for the results. The results are even listed in British papers with the bond number, not the person's name who wins it. It may not have the hype that the American lottery has, but it still is more fun than waiting ten to twenty years for an American bond to mature. When the lottery number is pulled the winner is notified within four days of the lottery.

There are even two prizes in the millions, so there is a chance of winning the big money twice a month. Even the smallest amount won is fifty ponds which is about a hundred and ten dollars. That right there is enough to triple the interest earned in the American bond market. The more premium bonds you buy, the more chances you have to winning the money. So if you have U.S. government bonds or an saving account that is pulling in less than three percent monthly, you might want to look at reinvesting the money into premium bonds and have so fun as well as having a chance to win over a million dollars.