Martin Lewis explains how much savings you need to make Premium Bonds 'worth considering'

Premium Bonds are a savings product, but alternatively of getting a guaranteed complaint of interest, you're entered into a monthly prize gully - this means your accidental of a instrumentality is down to luck

Martin Lewis has explained however Premium Bonds enactment - and if they are worthy investing in.

Premium Bonds are a savings product, but alternatively of getting a guaranteed complaint of interest, you're entered into a monthly prize gully - truthful your accidental of getting thing backmost connected your savings is down to luck. The smallest prize you tin triumph is £25 and the biggest prize is £1million - but winning isn’t guaranteed, and immoderate months, you whitethorn not triumph thing astatine all.

There are lone 2 £1million prizes handed retired each month, versus millions of overmuch smaller prizes. You get a unsocial enslaved fig for each £1 invested, and you tin put from £25 up to £50,000 successful full successful Premium Bonds. One woman, known lone arsenic Carol, contacted the Martin Lewis Money Show connected ITV to inquire whether she should max retired her Premium Bonds to the afloat £50,000.

The likelihood of winning connected the Premium Bonds is presently 21,000 to one, but this volition spell down to 22,000 to 1 from December 2024. This is due to the fact that the prize money complaint - which is the closest happening Premium Bonds has to an involvement complaint - is falling from 4.4% to 4.15%.

This means for each £100 invested successful Premium Bonds, the “average” instrumentality is £4.40 - though Martin explained however this doesn’t rather enactment successful reality. He said: “You can't, due to the fact that the smallest prize is £25. What would really hap is, amongst 20 people, 19 would triumph nothing, and 1 would triumph £25 oregon £50. That's much apt to beryllium the probability.”

The MoneySavingExpert.com laminitis explained however astir radical with emblematic luck won't really get a instrumentality of 4.15% - the complaint the prize money is falling to from December 2024 - which means mean savings are much apt to bushed Premium Bonds. However, if you’re apt to wage taxation connected your savings, past it could inactive beryllium worthy considering Premium Bonds. This is due to the fact that immoderate winnings you get from Premium Bonds are ever tax-free.

In effect to Carol and her £50,000 savings, and nether the presumption that she would extremity up paying taxation connected her savings, Martin said: “The archetypal happening I [would] bash is, enactment your wealth successful a currency ISA, and if you filled up ISA, and you're inactive paying taxation connected savings truthful you're supra the idiosyncratic savings allowance, that's erstwhile these travel into play.

“You privation to have, if you're going to bash it, you privation to beryllium maxing retired astatine the £50,000, oregon arsenic adjacent arsenic you can, £20,000, £30,000 oregon £40,000, and you privation to beryllium idiosyncratic who pays taxation connected savings interest, due to the fact that different the returns aren't that good. So for higher earners with tons of savings who are paying taxation connected interest, it's a bully bet. For those radical conscionable putting a tiny magnitude of wealth in, who don't wage taxation connected savings, it's a truly mediocre bet.”