The British Chancellor Harold Macmillan unveiled plans for a new state saving scheme offering cash prizes instead of interest. The premium bond would be “something completely new for the saver in Great Britain,” he told MPs. He announced he scheme the previous day in his Budget.
The scheme was part of what he called his “savings budget” aimed at getting more people to save money by offering a top prize of £1,000. However the proposal was likely to draw criticism from those who saw the scheme as a form of gambling and therefore opposed the idea on moral grounds.
The first premium bonds went on sale in November 1956 and the first prize draw was held in June 1957. The bonds were extremely popular with the public, perhaps because the only other chance of winning a large sum of money was through the football pools, betting on the results of matches.
The government agreed to pay interest on the bonds invested and the money it raised was then used for prizes. Winning numbers were generated by an Electronic Random Number Indicator Equipment, a computer otherwise known as Ernie.