The fun of playing the Lotto games every week is that we can all dream about how we would spend our winnings. The truth, of course, is that few of us really expect to win the jackpot. Prize Bonds, however, are thought to be a more sensible option. But Mr R from Co Kildare recently spotted a letter to the London Times about the equivalent British product - Premium Bonds - in which a Mr Ingrams, who holds 15,000 bonds, was highly sceptical of the British National Savings authority which claims in its promotion material that "a holder of 20,000 bonds should expect to receive a total of 13 prizes per year, an average of one per month. Pro rata, a block of 5,000 bonds would be expected to win three or four prizes, yet one of my blocks of 5,000 has failed to win any prize in 13 months. A set of 15,000 bonds has failed to win any prize in seven months".

Our reader writes: "The attached letter prompts me to ask the same question about the Irish Prize bonds. A holder of say, £25,000 worth of Irish Bonds (i.e. 5,000 bonds at £5 each) should expect to win a total of how many bonds per year?"

Since Mr R is unhappy with the prize-winning record of his bonds Family Money contacted the Prize Bond company for its comments and how the odds were calculated. "The more Prize Bonds you hold the better the chances of winning," says Mr Brendan Moran, marketing manager of the Prize Bond Company. "An investment of £1,000 in Prize Bonds gives a one-in-six chance of winning a tax-free cash prize of between £100 and £100,000 once a year, every year the bonds are held. And there is an even-money chance of winning a prize once a year, every year on a deposit of just £6,000."

The company then supplied us with the table above. If our reader is the holder of £25,000 worth or 5,000 bonds, according to the company's own calculations, he should be winning a prize at least four times a year. Prize bonds are not taken seriously by financial planners or advisers as savings or investment options, mainly because they pay no interest whatsoever and are 100 per cent exposed to inflation. If cashed in today, £100 worth of Prize Bonds purchased 30 years ago would still have a face value of £100, but in spending terms would represent a fraction of its original value. Had the same £100 been spent on blue chip stock in 1967, its value today would be a large multiple of thousands. Even a deposit account, securing interest that only matched the rate of inflation, would at the very least maintain the purchasing power of that original £100.

Yet Prize Bonds are big business and sales were up 11 per cent to nearly £30 million last year. The total prize bond fund, as of last March, was worth £146 million. Half the adult population owns a prize bond with seven bonds representing the average holding. An average of £138 worth of bonds is bought at any given time, but purchases of £1,000£5,000 are "now becoming commonplace" says the Prize Bond Company.

In the letter to The Times of London, Mr Ingrams concluded that the six wins worth £400 that he had experienced over the past year reflected an annual return of just 2 per cent, less than the British rate of inflation and he suggested that in the case of the British premium bonds market, "the many unpublicised losers are subsiding the few big winners".

Here in Ireland there are 400 prizes drawn every Friday for the weekly draw and the top weekly prize is the £15,000 Star Prize. The biggest single prize of £100,000 is drawn once a month. Just 3.5 per cent of the funds invested are paid out each year with 25,000 bond holders winning just under £5 million (or an average of just under £200) during 1996.

The Prize Bond's motto may be `You Never Lose!', but unless Mr R's large stock of bonds is paying out at least four times a year and exceeding the rate of inflation he may want to reconsider the size of his holding. Finance advisers Family Money consulted, said that no one should have £25,000 worth of Prize Bonds unless they represented just a small proportion of a valuable, balanced portfolio of investments.

Prize Bonds certainly have their place - their feel-good factor alone is a big selling point - but you probably shouldn't expect to get rich from them and you certainly shouldn't neglect more conventional investments in preference to them.