August 29 1999 INSIGHT

Savers hit by premium bond fiasco

SAVERS with premium bonds have been missing out on thousands of prizes because of computer problems affecting "Ernie", the National Savings machine that chooses the winning numbers.

The problem, which has affected as many as 9m potential winning numbers, is the biggest crisis in the 43-year history of premium bonds. It could knock public confidence in what, until now, has been regarded as one of the most trusted forms of saving, particularly for children.

The crisis unfolding at the National Savings offices in Blackpool this weekend is the latest in a series of computing blunders that have haunted new Labour's modernisation of the civil service.

The failure affecting the Electronic Random Number Indicator Equipment (Ernie), the number cruncher at the heart of the #12 billion premium bond system, follows mistakes by computer consultants overhauling government departments.

It could also affect far more people than the thousands of families ensnared in the Passport Office and Contributions Agency delays earlier this year.

"Ernie has been throwing back numbers which were in fact winners. This may make the passport fiasco look like small beer," said a source close to National Savings.

This week the City accountants Deloitte & Touche will be called in to establish exactly how many bond holders have lost out because of the malfunction and whether the same problem has occurred before.

Yesterday National Savings, the government savings arm responsible for the premium bond system, which has more than 23m bond holders, confirmed that premium bond numbers in the computer which supports Ernie had not been properly activated after a data inputting error. "We ran a couple of computer processes in the wrong order in August last year," said Joe Logan, a National Savings spokesman. "As a result some 9m numbers have been incorrectly noted as being ineligible for prizes."

The error was detected two weeks ago when a bond holder wrote to National Savings to complain that although he held a bond with a winning number thrown up by Ernie, he had not received any money.

Initially he was told he was mistaken. Further checks, however, revealed that the computer which matches Ernie's winning numbers with premium bond numbers had been behaving erratically.

Preliminary investigations have now shown that at least 5,000 of the 9m premium bonds affected have missed out on prizes. These bonds were held by 815 people, who have received letters of apology and #350,000 in overlooked prize money, plus interest.

The incident comes at a sensitive time for National Savings and its new administrative partner, Siemens Business Services, which took over the running of National Savings' computer systems in April.

Last August, National Savings was heavily criticised by the National Audit office after an #8m "black hole" was found in its accounts.

Siemens, which runs computer systems for several other government departments, was penalised to the tune of #4.5m for causing administrative delays at the Immigration and Nationality Directorate earlier this year. A massive backlog of asylum and refugee cases resulted, and the issuing of British passports was so severely affected that many people's summer holidays were disrupted.

Ernie is no stranger to controversy. It has been accused of everything from fixing draws to showing bias against the Scots and the Welsh. In 1990, MPs called for an investigation into allegations that MI5 had routinely used Ernie - whose top prize is #1m - as cover for paying freelance agents. None of these charges, however, was ever proved.

The latest scandal could prove far more damaging. The integrity of the premium bond system hinges on bond holders trusting that their numbers will be recognised when they "come up on Ernie".

Jean Simpson, 74, a long-time premium bond holder from Lytham St Anne's, near Blackpool, with #110 invested, said: "I've always had faith in Ernie but now I'm not sure. I have always thought my numbers should have come up a little more often - they have only come up twice in nearly 40 years."

Insight: Paul Nuki, Gareth Walsh and David Leppard

http://www.sunday-times.co.uk/news/pages/Sunday-Times/stinweins01001.html?999

-- Homer Beanfang (Bats@inbellfry.com), September 03, 1999

Answers

Even though I'm a "doomer", I don't know quite how to interpret this, since no direct mention of Y2K was made. It may be coincidence. It may be that all of us are just more computer system failure AWARE, so we pick up on stuff like this that we normally wouldn't look twice at.

But this system is old, probably was not ORIGINALLY ready for Y2K, and it sure would be nice to know what has been done to make it Y2K compliant. And when.

-- King of Spain (madrid@aol.com), September 03, 1999.

Premium bonds are the UK equivalent of US savings bonds. The "Ernie" computer to pick "raffle" winners at random was first introduced when I was a child, so you know how long ago THAT was. I don't know if the current computer is old Ernie (probably not) or grandson (great-great-grandson?) of Ernie, but the article connects the problem with the passport fiasco which COULD be classed as a Y2K problem. Maybe the BeebCeeb, ITN or Electronic Telegraph will have more detail. I can't look because BOTH my computers are screwed up at the moment. (Not Y2K problems, by the way. At least I don't think so.)

-- Old Git (anon@spamproblems.com), September 04, 1999.