A new provision in the 2004 Finance Act hit sales of prize bonds in the second half of the year, the company responsible for the scheme said yesterday.

The Prize Bond Company Ltd, a joint venture between Fexco and An Post, said yesterday that sales for the year were €126 million, down on the 2003 figure of €134.5 million.

However, 2003 was a record year for bond sales, and was 62 per cent ahead of 2002. Chairman Michael O'Keeffe yesterday blamed a provision of the Finance Act that required all new investors in savings products to establish their identity and address for tax purposes.

Investors in the bonds were required to give this information, even though the prizes are tax free for Irish residents. These details were originally sought when people were buying the bonds.

Mr O'Keeffe said this created difficulties for gift purchases and "impulse buys". However, the National Treasury Management Agency (NTMA) intervened and it was subsequently agreed only to seek this information when somebody won a prize.

"This has largely resolved the difficulties that had arisen, and the volume and value of the purchases has been restored," Mr O'Keeffe said in a statement yesterday.

The company revealed that the total amount invested in prize bonds reached a record €506.4 million at the end of 2004.

It paid out €11.2 million in prizes to over 110,000 people. The average purchase during the year was €723 worth of bonds, the company said.