Bonus Bonds: What are your chances?

Bonus Bonds : what are  your chances of winning?
Monthly prize draw Photo credit: Getty

Part of the Kiwi culture since 1970, 1.3 million kiwis currently invest in Bonus Bonds. 

Bonus Bonds are a fixed interest and cash-based investment that provides no fixed investment return other than the chance to win monthly cash prizes.

With the top monthly prize capped at $1m, the prize pool also consists of smaller prizes of $100,000 and $50,000 and multiple prizes of $5,000 and under.    

Craig Mulholland, Head of Wealth & Private Bank at ANZ said in the August 2019 prize draw, the total amount paid in prizes was $2.97m and the chance that each bonus bond would win a prize was 1 in 37,275.

The chance of winning a prize changes each month and ranges from 1 in 35,000 and 1 in 78,000 - a governing document specifies that the odds must be at least 1 in 9,600.  

With each Bonus Bond valued at $1 and a minimum investment of $20, Mulholland confirmed that in the August draw, each bonus bond had a one in 3.101b chance of winning the main prize of $1m.

With odds so small - and the fact that Bonus Bonds aren't guaranteed by the Government (this changed in 1992 when ownership of the scheme transferred from the NZ Government to ANZ), are they more of a lottery than an investment?  

Mulholland said that Bonus Bonds are often bought for children to help provide for their future and to teach them about saving and investing.

In response to a Bonus Bonds article by MoneyHub and shared on Reddit, people were quick to point out the low chance of winning, with good luck seeming to run stronger for some.

"I owned Bonus Bonds for 30 years. Never won a thing, didn't gain a cent," said 'MrWainscotting' on Reddit.

"I have had $10k in there for either two or three years now and my total balance sits at $10,130 so it's pretty much a waste of time for me.

"My partner who has $100k in there, wins at least $20 every 2-3rd month," shared 'qnull'.

'Dmat16' said their banker told them Bonus Bonds are not an investment, likening them to buying a lotto ticket. 

With the maximum first division prize under Powerball set at $50m, NZ Lotteries Commission confirmed the largest prize ever was $44m, paid to a couple in Hibiscus Coast in 2016.

The Commission also said that the odds of winning PowerBall First Division are 1 in 38 million and that in an average week, over $632,000 in prizes are won across Lotto, Powerball and Strike, with the average Kiwi spending $14 per transaction.

Although a Lotto ticket provides  a greater chance of winning - and by a higher amount - unlike Bonus Bonds, if you don't win, you won't get your money back.

Mulholland said that the ANZ branch contacts the three monthly prize winners of $1m, $100,000 and $50,000 and remaining winners by post or email. If someone can't be  contacted, a prize is paid in the form of new Bonus Bonds on their account.

Information about recent winners on the Bonus Bonds website includes an elderly couple from the Hawkes Bay, who had held bonus bonds for 30 years and won smaller prizes, before winning $1m in May 2019 from Bonus Bonds they'd purchased in 2013. 

A Hawkes Bay man in his 80's had won $100,000 in April, the largest prize he'd won after being a Bonus Bonds investor for over 40 years.

Licensed under the Financial Markets Conduct Act and regulated by the Financial Markets Act, Bonus Bonds are owned by ANZ.

People who have left their Bonus Bonds accounts dormant for years can trace them via the Bonus Bonds web site.