The post-crash years, not to mention Covid, has made us all a little more cautious about holding money ‘just in case’. And it makes even more sense to have access to ready cash if you lose your job, or a massive energy bill lands.

But one product has proved enduringly popular, despite offering no interest at all – €4.7bn is currently plumped with the National Treasury Management Agency (NTMA) through prize bonds.

Often disparagingly referred to as ‘granny bonds’, the product, around since 1957 remains widely held and its unchanging nature, along with the small possibility of a big win means they are a stalwart of the country’s finances. There are still owners with prize bonds from that very first draw.

So, like ’em or loathe ’em prize bonds are here to stay. I love them, and so does Moneydoctors.ie guru John Lowe.

“A major selling point is that your money is guaranteed by the Government in a joint venture between the NTMA and Fexco, a Kerry financial group. It’s completely safe. I have three clients with €500,000 each in prize bonds; under current rules you can only invest up to €250,000, and one of them recently said to me: ‘John, you have no idea of the pleasure I get from listening to my letterbox go on a regular basis!’

“They should be part of a balanced portfolio and are ideal for gifts or simply a holding account where you may need the money within a year,” he says.

As savings go, the return for comparative purposes is 0.35pc per annum. Considering you can get up to 1.5pc per annum from PTSB for a three-year fixed deposit, it’s not great. Then again, once Dirt tax is taken – prize bond winnings are tax free – it really doesn’t matter for many.

Certified financial planner Marc Westlake is less of a fan.

“You are very likely to win nothing at all for a small holding and for cash that needs to be on deposit you are better off keeping a sensible amount in your current account for day-to-day purposes, with an emergency fund in State Savings Certificates. Although these are issued in three, four or five-year terms, they are accessible on seven days’ notice and you don’t lose the tax free element, but you get no interest if you hold them for less than a year. Everything else should be set against reducing debt and/or making pension contributions.”

Murray McCarter, Head of Retail Debt at the NTMA, says it’s that hope of winning prizes which makes prize bonds “a very attractive form of investment” along with the guaranteed access to the full amount they invested, “a direct, unconditional obligation of the Irish Government’, after an initial 90-day holding period. 

When you buy a prize bond, you are essentially lending the Government your money. When interest rates are rock bottom – or in the ECB’s case, zero for the last seven years – the Government doesn’t really need the public’s investment. But now they are rising, bonds may once again look attractive.

Banks lobby heavily against prize bonds, as they see them as competition for customers’ dosh. This has resulted in the number and value of prizes dropping over the years, but is that changing?

The NTMA announced interest rate increases on state savings products in line with other financial institutions last week; but notably omitted prize bonds.

Where prize bonds make sense

If you need to store liquid cash for less than three years, it is an option. Wins are tax free, your money is guaranteed, and you won’t do much better in a bank.

For self-employed people, it’s a great way to fund October’s one-off tax bill, as a means to provide for it each month. Storing up Revenue’s cash in prize bonds means they’re less likely to dip into it, and in any event, can’t access it for three months each time.

If you are elderly and need to mind your cash, and don’t have the time or risk appetite for investing, there’s nothing wrong with splitting your money between deposits, prize bonds and other state savings products.

Starting at just €6.25 each, they make a lovely gift for grandchildren or relatives.

Where prize bonds don’t make sense

If you have money to invest, and don’t need it for at least five years, you’d be crazy not to look at higher returns from equities, or other managed products sold through insurance companies, says Eoin McGee, author of How to Make Your Money Work.

He adds: “Prize bonds are a short-term vehicle for a short-term goal. The rates should be going up quicker, and I’m not a big fan, but my attitude to money needed in the next five years, picking and choosing the best of a bad rate doesn’t really matter.”

How prize bonds work

Prize bonds form part of the State Savings mechanism, which is run by the National Treasury Management Agency (NTMA). They are purchased from post offices or online at statesavings.ie, along with the full range of other products.

Each prize bond costs €6.25, however, you must spend a minimum of €25 per purchase (four bonds). The maximum holding by any one person is €250,000. Prize Bonds can be purchased as a gift in the name of a minor (under 18). For values up to €100 the name/address of the recipient and purchaser are required, and for any more, the PPSN is also needed along with the signature of the parent/guardian.

All monies are fully guaranteed by the State and can be returned, on demand, once the bond is held for a minimum of 90 days, or three months. Once past this initial period, you need to give seven days’ notice and should return the bond, with the appropriate encashment form, to Fexco in Kerry.

You will be entered into all draws from the first week of purchase.

Prize draws are held every Friday and winners notified automatically the following week. At the current rate of return, the total prize money amounts to around €15,400,000 every year, according to John Lowe.

There are four €250,000 prize awards in the last week of March, June, September and December.

For all other weekly draws, the top prize is €50,000 with 10 prizes of €1,000, 10 prizes of €500 and all remaining prizes are €50.