Premium Bond
A
premium bond is a
bond issued by the
United Kingdom government's
National Savings & Investments scheme. The government promises to buy back the bond on request for its original price.
The government pays interest on the bond, but instead of the interest being paid into individual accounts, it is paid into a prize fund, whereby a monthly lottery distributes tax-free prizes or
premiums to selected bond holders whose number has come up. The machine that generates random numbers for the lottery is called
ERNIE, for
Electronic Random Number Indicator Equipment. There are many different prizes ranging from £50 to the top prize of £1,000,000. Around 23 million people own Premium bonds, about one third of the UK's population.
ERNIE is a hardware random number generator.
Each person may own up to £30,000 in Premium Bonds. Bonds are currently sold in multiples of £100.
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