# odds of winning on prize bonds



## Horatio

The prizebond companies website claims that:





What are the chances to win a prize if you have for example €1,000 invested?
A customer with 
	

	
	
		
		

		
		
	


	




 1,000 invested has a 4.1 to 1 chance of winning a cash prize in a 12 month period. 

so by extension if I have a 100K in prizebonds, the odds of winning are:
0.041 to 1 in a 12 month period, right?


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## Dropout

I've had €1000 worth of prize bonds for nearly 2 years and never won anything.

The odds are a lot higher than 4.1 I think.


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## LennyBriscoe

My father has €1000 worth of bonds for the past 7 years. He has won 4 times, each time €75.


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## Bessa

A quick tip, make sure that all bonds are in your name, eg. especially if you have been left bonds in a will. Years back my aunt had not transferred bonds to her own name after her mother died, she had a win of 5,000 pounds which she never got. Back then this money would have bought about two houses.


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## PMU

Horatio said:


> so if I have a 100K in prizebonds, the odds of winning are: 0.041 to 1 in a 12 month period, right?


 I think you’re right. I’m not a mathematician (as what follows may prove this!) but, if you have a 4.1 to1 chance of winning a prize in 1 out of every 12 months with average luck and with €1,000 of prize bonds (i.e. with 160 chances of winning each month), it implies each bond you own has odds of 656:1 of winning a prize in 1 out of every 12 months. This is a probability of 0.001524.  So, if you were to buy €100,000 of prize bonds (i.e. 16,000 chances of winning) each with a probability of 0.001524 you have a 16,000*0.001524, i.e. 0.041 to 1 chance of winning a prize in a 12 month period (with average luck).


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## Marc

Prize Bonds
  The company was set up in 1989 to operate the scheme for the Minister for Finance. The scheme is now operated on behalf of the National Treasury Management Agency (NTMA) which manages the national debt on behalf of the Minister for Finance. In 1999 the company submitted a successful tender to operate the scheme for a further 10 years until September 2009. 

An Post is responsible for the accounting, marketing and the conduct of the draw. The administration is carried out by FEXCO in Killorglin, Co.Kerry. 
  Prize Bonds are a flexible, secure, state guaranteed investment. The top prize in the monthly Jackpot prize draw is €1,000,000 or €500,000. A €1,000,000 Jackpot prize will be awarded in three draws throughout the year, with the fourth awarded in the draw held on the last Friday before Christmas. A top prize of €500,000 is awarded in the other eight monthly Jackpot prize draws. A top weekly Star prize of €20,000 is awarded each week, other than when the monthly jackpot prize is awarded. With a minimum purchase of €25, that's a huge return on your investment.


  Draws are held every Friday with over 2,500 prizes ranging between €75 and €20,000. Every eligible €6.25 Prize Bond is automatically entered in the weekly draw no matter how old.


  The more Prize Bonds you hold the greater the possibility of you getting a substantial return on your money. 


The Prize Bond Company Ltd. is a joint venture operated between An Post and FEXCO. 

The number of prizes awarded each week depends on the total size of the Prize Bond fund. It is currently calculated at a variable rate of 3% of the fund size per annum. This provides over 2,500 prizes every week.
        Tax-free
All winnings are tax-free. In Ireland winnings are not liable to Income Tax, Capital Gains Tax, or D.I.R.T. (Deposit Interest Retention Tax).

Prize Bond holdings at 31 December, 2007 

  Number of separate Prize Bond holdings 5.43 million
      Fund value €631.1 million 

  Source: The Prize Bond Company Limited Annual Report 2007

  Analysis
    The capital is very safe. You don’t risk the money you put in, only what interest you’ll get, and Prize Bonds are operated by An Post which is backed by the State.


What are the odds of winning :
The odds of any single bond winning the top prize are about 1 in 5.4 million (the number of bonds in circulation)
  However the minimum investment is €25.
  Furthermore, the draw for €1m only takes place 4 times a year.
  The other 8 months, the prize is €500,000
  In comparison the odds of winning the UK Premium bonds are 18 billion to 1.
  You’re likely to win even less than the interest rate.
  The value of prizes paid out is determined by an interest rate, which is currently 3%. This means if you owned every Prize bond in existence, the amount won over a year would be equal to 3% of what you put in. 
  So very roughly, on average for every €100 put into Prize Bonds, you'd expect a €3 annual return.


  Yet because of the way the prizes are allocated, the majority of people will win much less than the interest rate anyway. 


  Don’t think of it as ‘winning’
  The great attraction is ‘the lottery effect,' the chance of winning a dream, and there is of course the chance of winning a million. Equally you could be the next space-walking astronaut, and you’re odds probably aren’t that dissimilar! 


The fact the payouts are commonly referred to as a ‘win’ rather than an ‘interest payment’ is psychologically devious. Comments like, “my friend wins €75 every few months” mislead; on clinical evaluation, someone with €10,000 of Bonds should ‘win’ €300 a year; that’s roughly €25 every month; yet the same cash in a savings account could ‘win’ over €41 every month or €500 a year.


Worse still, compare the Prize Bond interest to the current rate of inflation, which is almost certainly higher than the Prize Bond interest rate, so any cash you have in bonds is increasing more slowly than the prices of everyday goods. This means by holding bonds the real amount of money you have is decreasing. 


Are they ever worth it?
  Look at Prize Bonds with a clinical financial eye. Some will win more than the average, not many, but a few. And if you're that lucky person, this is a great return. Yet the odds of winning big get very long.


Prize Bonds aren’t as good as they first appear
  It's all about the actual prize distribution.  The following is the prize structure:


         Monthly   Jackpot Prize

         4 x €1,000,000



A €1,000,000 Jackpot prize   will be awarded in three selected monthly Jackpot prize draws throughout the   year, with the fourth awarded in the draw held on the last Friday before   Christmas.

         8 x €500,000



         The €500,000 Jackpot prizes   will be awarded in the monthly prize draws held on the first Friday of the   other eight months.


         Weekly star prize €20,000

         is awarded each week, other than   when the monthly Jackpot prize isawarded.


         5 prizes @ €1,000


         10 prizes @ €250


         Over 2,500 @ €75​  Why most people win less than the interest rate

  Even though Prize Bond rates stack up poorly compared to decent savings rates, even that’s still misleadingly generous; the real expected payout is much less, as it's massively skewed by the distribution of the prizes.

This is tricky to understand, so let me start with a simple example. Suppose there a contest offered a €1,000,000 prize and allowed a million people to buy a ticket costing €1. It could then be argued the average winnings per ticket were €1, even though 999,999 people would win nothing. 

A similar, though less drastic, effect is happening with the Prize Bond interest rate; it says the payout is 3%, so you'd expect to win €3 per €100. Yet of course this is impossible, there isn't a €3 prize; you can either win nothing, €75, or more than €75. The big jackpot prizes, won by a miniscule number of people, skew the payout average and make the interest rate look much more generous than it is.

The situation that this throws isn’t a pleasant concept for Prize bond holders expecting an average of 3%pa.

  On the surface Prize Bonds don’t look to be too complex. The winners are happily listed on the website with enough data to allow anyone with a calculator to work out the chances of any one bond winning a single prize over a month.

Yet to work out the chance of someone with a larger holding say five thousand bonds winning more includes countless variables. To win €1000 in one go could be one €1000 prize, or four €250 prizes, or a combination of smaller prizes; yet to win more than €500 holds scores of variables. 

Plus of course, the draws are monthly but the €1,000,000 prize is only every quarter, so if you’re calculating the assumed winnings over 5 years; it actually means you’re calculating the interaction of probabilities for over 60 draws to get the various answers. 

  To calculate the probability of winning is virtually impenetrable. You would need to use a very advanced multinomial probability equation.


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## Ben Graham

Excellent post.


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## z106

Ben Graham said:


> Excellent post.


 
that was a good post by that guy marc alright.

i'm presuming you didn't go to the trouble of writing it yourself marc ?
in the off chance that i am wrong then it was indeed a VERY good post.

In answer to the original qustion if the odds of winning a prize during any 12 month period ar 4.1 to 1 with 1000 invested then what are the odds if someone has 100000 invested?

Basically - 4.1 to 1 implies a 19.6% chance of winning 
i.e. 80.4% of losing.
So - if you have 100000 invested then what are the odds of never winning over the 12 month period?

With 100000 you have 100 chances of losing every time.
The odds of NOT losing every time (i.e. winning at least once) with 100000 invested is 1 - (0.804 ^ 100) = 0.9999999999.

i.e. a 99.9999999% chance of NOT losing EVERY time.
i.e. winning at least once.

i.e. it's pretty much guaranteed as anything can ever be. 

SO - if you have 100k to invest then go for i say.
Of course you ma only win the minimum of €75 but what is life for if you can't have an auld punt every now and again !


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## extopia

It seems Marc "adapted"  article from another site to create his post.


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## dublintimmy

I have 77K in prize bonds - I win every couple of months - sometimes 75 euro, sometimes 150 euro. I'd say I win about 600 a year or so. If I win on a Friday, the cheque is in my post box by the following Tues or Wed which is good. I need to have the money in an 'account' from which I can take it out quickly and that's why I chose PBs, normally I'd just put it into a long-term savings account.


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## Billo

I have €1,500 in for about 4 years with zero return.
"C'est la vie" or something.


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## dockingtrade

3000 for 3 years 4 x €75 wins. Not a bad return with the chance of winning big


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## paddyd

got gifted €50 prize bonds 2 years ago and won 2x€75 since.


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## dockingtrade

paddyd said:


> got gifted €50 prize bonds 2 years ago and won 2x€75 since.


 
with thatt return you should buy more prize bonds


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## dewdrop

I had prize bonds for over 40 years. last year i got a letter in post and as i do not receive much mail i checked the frank mark on the envelope which had an irish version of Killorgin i think where i knew the bonds were based. My blood pressure rose as i slowly opened the envelope as i anticipated a hefty cheque. Much to my dismay it was only for 75 euro and it was only then i realised vast number of prizes are for this amount.


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## c00lcarl

I have held a small number of prize bonds for over 5 years and never won a penny from them


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## c00lcarl

dublintimmy said:


> I have 77K in prize bonds - I win every couple of months - sometimes 75 euro, sometimes 150 euro. I'd say I win about 600 a year or so. If I win on a Friday, the cheque is in my post box by the following Tues or Wed which is good. I need to have the money in an 'account' from which I can take it out quickly and that's why I chose PBs, normally I'd just put it into a long-term savings account.


 

Based on 600 per year average return you are receiving less than 1% (0.77%) in interest on your 77000, in real terms you are losing money as inflation has been running at around 4% for the last few years. 

77K could do much better if invested properly, you should speak to your bank manager or financial advisor about a more efficient investment which allows easy access if needed, in fact I think my current account pays more than 0.77% interest.


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## dublintimmy

In the last six months I've noticed that I've won 825 - so if that were to continue, it would be 1650 over one year - and not the 600 I mentioned in the above post. The thing is - luck plays a huge part. Also - I'm about to withdraw the vast majority of it (70K) next week to loan to a friend. 
T


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## monascribe18

I bought 50 bonds when they first came out never a win as yet ,been better haveing it in the lottery on on the horses,well i have not lost it,only the buying power between then and now would be considerable i,d think


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## Horatio

dublintimmy said:


> I'm about to withdraw the vast majority of it (70K) next week to loan to a friend.
> T


 
Careful now !! - Friends & Finance do not mix well


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## sexitoni

I was gifted two for £10 as a baby in 1978, which have never won anything! Still worth I have a total of 14 that I've been gifted over the years since. Nothing. I guess £10 then is the equivalent spending power of about €50 now.


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## samanthajane

i have a lot of prize bonds ( dont know the actual value ) between me and my children, and we've never won a thing. I dont actually know anyone that has ever won anything. But there nice to get as presents especially for the kids, they will probably never win anything but at least when they are older they can cash them in and do what they want with the money. 

I'm curious now...have to go and dig them out and find out how much they are worth.


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## thedon

I have held prize bonds for over 15 years now and have invested about a grand a year so that now I have around €14,000 in prize bonds and I "win" on average 6 times a year ( usually the €75 prize ) = €450.

I have won the €1000? in the past and a few other smaller ones ( 150? ) my baby son won €150 recently and he only has €50 in prize bonds ( must be a lucky so and so )

Gotta say I do understand that they are not a great investment but in my case I think I am the exception ( just lucky I guess ) and I do place the bulk of my savings in high interest fixed term accounts and basically see the prize bonds thing as a "punt"  but I'm quite happy with things at the moment and see no reason to cash them in as you could always win the big one ) yeah right! 

On a side note I wonder will the mini budget affect prize bonds in regards to tax, DIRT etc. if they up DIRT then prize bonds could become quite attractive to a lot of folks in relation to safety and their tax free status, however if they abolish the tax free status of prize bonds they would become worthless to a lot of folks myself included, hhmmm


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## roro123

Surely if its 4:1 on €1000, then each €1000 in the €100,000 has a 4:1 chance and therefore overall  €100,000 has a 4:1 chance.


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## katiem

last year when we renewed our car insurance we got €50 worths of bonds, valid for a year, and won €75. i bought €4000 worth of bonds, just holding on to the cash for a year before giving to my son, and in the first three months, i won €75 each month.  not a bad return.  havent won anything since, but with the interest rates so low putting 2 or 3 thousand in bonds for a few years doesnt seem such a bad idea.


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## eeyore2502

I have a few for several years now and have never won a single thing on them.  Do you have to keep checking online or will you be notified in the post if you win?


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## allthedoyles

eeyore2502 said:


> I have a few for several years now and have never won a single thing on them. Do you have to keep checking online or will you be notified in the post if you win?


 
We have 2, dated 1957 and still have not come up


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## thedon

They notify you by post however their website has the ability to check unclaimed numbers as well.


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## eeyore2502

Might have to pull them out and have a look.


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## Sumatra

Irish Life used to sell thousands of them. Free with every industrial branch policy. Years and years of them. Customers would get their photo taken holding their winning cheque in the local paper if they as much as a £1,000 and there weren't that many. This would spur the sale of many more. Prize Bonds remind me of the Father Ted scene "Unless it's *UHT* milk, but there's no demand for that because it's *****e*. *..."*


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