A Premium Bond is a bond issued by the United Kingdom government's National Savings and Investments scheme. The government promises to buy back the bond on request for its original price. In finance, a bond is a debt security, in which the issuer owes the holders a debt and is obliged to repay the principal and interest (the coupon) at a later date, termed maturity. ... NS&I National Savings and Investments (NS&I), formerly called the National Savings Bank, is a state owned savings bank in the United Kingdom. ...

The government pays interest on the bond, but instead of the interest being paid into individual accounts, it is paid into a prize fund, from which a monthly lottery distributes tax-free prizes, or premiums, to selected bond-holders whose numbers 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, of which there have been two per month since the summer of 2005 (and one per month prior to that). Currently, the odds of winning a prize for each bond number held is 24,000 to 1. Around 23 million people own Premium Bonds, over one third of the UK's population.

Each person may own up to £30,000 in Premium Bonds. Bonds are currently sold in multiples of 10, with a value of £1 per bond and a minimum purchase of 100 bonds. When they were first introduced in 1957 they were incredibly popular — perhaps because the only other similar games of chance available to the general public were the football pools; the National Lottery did not exist in the UK until 1994. In Ireland, a similar investment scheme called Prize Bond also originated in early 1957. Pool has several meanings: A planted garden pool at Mission San Juan Capistrano It is any of several games similar to billiards, distinguished by using a table that has one pocket at each corner and one in the middle of each of the two longer sides. ... A play here! sign outside a newsagent, incorporating the National Lotterys logo of a stylised hand with crossed fingers. ... A Prize Bond is a non-interest bearing security issued on behalf of the Minister for Finance of the Republic of Ireland by the Prize Bond Company Limited. ...

The Premium Bonds operated from a site in St. Annes from its inception for over 40 years, later moving to new buildings in Blackpool. Lytham St Annes is a conurbation in the Fylde district of Lancashire, England. ... It has been suggested that South Shore, Blackpool be merged into this article or section. ...

ERNIE

ERNIE mark 1 console

ERNIE mark 2

ERNIE is a hardware random number generator. The first ERNIE was built at the Post Office Research Station by a team lead by Sidney Broadhurst. The designer was Tommy Flowers[1]. It was unveiled in 1957, generating its bond numbers based on the signal noise created by a bank of neon tubes. In computing, a hardware random number generator is an apparatus that generates random numbers from a physical process. ... The Post Office Research Station at Dollis Hill, London, was first established in 1921 and opened by the Prime Minister Ramsay MacDonald in 1933. ... Thomas (Tommy) Harold Flowers, MBE (22 December 1905 – 28 October 1998) was a British engineer. ... 1957 (MCMLVII) was a common year starting on Tuesday of the Gregorian calendar. ... In science, and especially in physics and telecommunication, noise is fluctuations in and the addition of external factors to the stream of target information (signal) being received at a detector. ... General Name, Symbol, Number neon, Ne, 10 Chemical series noble gases Group, Period, Block 18, 2, p Appearance colorless Standard atomic weight 20. ...

ERNIE 2 replaced the first ERNIE in 1972.

ERNIE 3 was introduced in 1988 and was the size of a personal computer; at the end of its life it took five and a half hours to complete its monthly draw.

In August 2004 ERNIE 4 was brought into service in anticipation of an increase in the number of prizes to be allocated each month from September 2004. ERNIE 4 was developed by LogicaCMG, is 500 times faster than the original ERNIE and generates a million premium bond numbers an hour; these are then checked against a list of valid bonds to determine the winning bonds before any prizes are awarded. By comparison, the original ERNIE could generate only 2000 numbers an hour and was the size of a van. 2004 (MMIV) was a leap year starting on Thursday of the Gregorian calendar. ... LogicaCMG (LSE: LOG, Euronext: LOG) is a UK-based global telecommunications, IT and management consultancy company. ...

ERNIE 4 uses thermal noise in transistors as its source of entropy for generating random bond numbers; the original ERNIE used a gas neon diode. In each case the randomness of electrons and natural unpredictable variance of the physical processes involved mean that systematic trends and similar cumulative effects that affect any pseudorandom number generator are reduced greatly, if not eliminated. ERNIE's output is independently tested each month by an independent actuary appointed by the government and the draw is only valid if the output passes tests that indicate it is statistically random. Ice melting - classic example of entropy increasing[1] described in 1862 by Rudolf Clausius as an increase in the disgregation of the molecules of the body of ice. ... A pseudorandom number generator (PRNG) is an algorithm that generates a sequence of numbers which are not truly random. ...

ERNIE apparently regularly receives cards and letters from the general public.

Prize Fund Distribution

The Mk.3 ERNIE (1988-2004)

The Current ERNIE (Mk.4)

The size of the prize fund on offer is equal to one month's interest on all bonds eligible for the draw. The annual rate of interest is set by NS&I and, at present, is 3.60%. The following table lists the distribution of prizes on offer in the March 2007 draw. [2]

Other meanings

A "premium bond" is also a generic term for any bond selling for more than 100% of par value, i.e., at a price greater than 100.00, which typically occurs for high coupon bonds in a falling interest rate climate.

Cultural reference

The Premium Bond and ERNIE are mentioned in Jethro Tull's song Thick as a Brick: This article or section does not cite its references or sources. ... Thick as a Brick (1972) is a concept album by the rock band Jethro Tull. ...

In the clear white circles of morning wonder, I take my place with the lord of the hills. And the blue-eyed soldiers stand slightly discoloured (in neat little rows) sporting canvas frills. With their jock-straps pinching, they slouch to attention, while queueing for sarnies at the office canteen. Saying — how's your granny and / good old Ernie: he coughed up a tenner on a premium bond win.

Also the popular 80s band Madness wrote the song E.R.N.I.E. which is on Absolutely, their second album. Madness are an English pop band that formed in 1976. ... Absolutely is the 1980 second album from the British ska band Madness. ...

Rock band Aconite Thrill has a song titled E.R.N.I.E; the lyrics, however, are seemingly unrelated to the song title.

A scene in the sitcom Some Mothers Do 'Ave 'Em saw Frank Spencer refer to his mother regularly sending 'Ernie' a Christmas card, in the hope that she would be favoured in the draw. A sitcom or situation comedy is a genre of comedy performance originally devised for radio but today typically found on television. ... Michele Dotrice and Michael Crawford as Betty and Frank Spencer Some Mothers Do Ave Em (1973-1978) was a highly successful BBC sitcom, written by Raymond Allen and starring Michael Crawford and Michele Dotrice. ...

External links

• National Savings & Investments website
• Facts about ERNIE
• BBC News story on ERNIE 4
• BBC News story mentioning ERNIE's use in selecting Premium Bonds
• BBC News: Are Premium Bonds worth it?
• MoneySavingExpert.com: Premium Bonds: Are they worth it?