Martin Lewis has explained who Premium Bonds are best suited for
Martin Lewis has offered guidance to anyone whose children hold Premium Bonds.
In the most recent episode of The Martin Lewis Podcast, the Money Saving Expert (MSE) founder explained how Premium Bonds operate, outlined who they are well-suited to, and identified who he considers the “worst candidates” for the savings scheme. NS&I Premium Bonds are the single most popular form of savings in the UK, with more than £136 billion held within them. However, Mr Lewis argues that “we tend to give them to the people they’re least suited for.”
The current Premium Bond prize fund rate stands at 4.35% – which sounds attractive. However: “Most people with typical luck will win less than that, and you can earn more just in a standard, top, bog-standard easy-access savings account.”
Mr Lewis went on to explain that Premium Bonds are well-suited to those who hold close to the maximum permitted amount of £50,000, “and those who are already going to pay tax on other savings”. He added: “They’ve used up their Cash ISAs, they’ve used up their savings allowances, where the tax-free nature of the bonds comes into play.”
Turning to those for whom Premium Bonds are less appropriate, he said: “People you’re giving small amounts to who don’t pay tax, like children. But we often give Premium Bonds to children. Now, I know some people think, yeah, but they’re safe because it’s NS&I, you know, it’s government-backed.
“But the maximum you can put in Premium Bonds is £50,000, and these days, all UK-regulated savings are protected up to £120,000 per person per financial institution.”
He went on to elaborate that Premium Bonds are well-suited to those who wish to keep their money accessible in savings, “if you’re putting a large amount in and you’re paying tax on other savings interest and you’ve used up your Cash ISAs”. He then reiterated that Premium Bonds “are worse for people who are putting relatively small amounts of money in and don’t pay tax – pretty much all children”.
Mr Lewis added: “The irony of Premium Bonds is we think of them as a great thing to give to children; children are the worst candidates for Premium Bonds.”
You can listen to the podcast in full here
