NS&I is lowering the Premium Bonds prize fund price whereas odds are lengthening and the private finance guru has spoken out
Martin Lewis has given his verdict on Premium Bonds vs financial savings (Picture: ITV)
Martin Lewis has delivered his evaluation on Premium Bonds – and whether or not they signify a superior choice to financial savings accounts to your money. Yesterday NS&I introduced a big adjustment to prize charges and successful odds.
NS&I is chopping the Premium Bonds prize fund price to three.30% efficient from the April 2026 draw, down from 3.60%. Concurrently, the chances for every £1 Bond will lengthen to 23,000 to 1 from 22,000 to 1.
Writing on X, Mr Lewis pointed followers in direction of a Cash Saving Professional web page which examined the bonds towards financial savings choices. And it means that usually talking, financial savings accounts provide a safer vacation spot for cash with a assured return. It acknowledged: “Premium Bond prizes aren’t taxed, which signifies that in the event you’ve bigger financial savings in money, and have maxed out your £20,000 a 12 months ISA allowance and earn sufficient curiosity to exceed your PSA, Premium Bonds are most likely an honest alternative… in the event you can settle for the random nature of the ‘curiosity’.
“For everybody else, money ISAs – financial savings accounts you by no means pay tax on – are nonetheless prone to be the higher alternative. The highest easy-access money ISA price is presently 4.4% – barely decrease than the usual non-ISA price, however tax-free and providing a assured return that is increased than the present Premium Bond prize price of three.6% (which you might want to be fortunate to get).”
Andrew Westhead, NS&I Retail Director, stated: “This transformation to the Premium Bonds prize fund price and odds displays modifications within the wider financial savings market, and ensures we proceed to steadiness the pursuits of savers, taxpayers and the broader monetary companies sector.
“Premium Bonds proceed to be the most well-liked UK financial savings account. Having just lately handed £40 billion in prizes drawn, the April draw is anticipated to have shut to 6 million tax-free prizes value round £375 million. Launched 70 years in the past in November 1956, Premium Bonds keep their distinctive attraction by providing 100% safety, the flexibleness to withdraw simply, and the thrill of doubtless successful a tax-free prize every month.”
The MSE founder beforehand acknowledged on his BBC Podcast that he believes in most conditions, savers would obtain higher returns by depositing their funds in a standard financial savings account. Listener Josie requested: “My associate and I’ve £60,000 in Premium Bonds is it now time to begin seeking to make investments the cash some place else?”.
Explaining the likelihood of successful, Mr Lewis clarified that the prize price – presently standing at 3.6 per cent however dropping to three.3 per cent from April – signifies the anticipated returns. He stated: “The premium Bond prize fund price is 3.6 per cent presently. Now what meaning is in the event you had been so as to add up each single Premium Bond in existence within the UK and you’re taking 3.6 per cent of it that is how a lot they’re paying in prizes in a 12 months.
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“Now what that does not imply as a result of it would not work that method is in the event you put £100 in Premium Bonds you are going to get £3.60 as a result of that is unattainable. The smallest prize is £25. So what occurs on £100 is lots of people get nothing and some get £25. Meaning the imply common is 3.6 per cent however much more essential is the median common which is zero on £100 in Premium Bonds over a 12 months.
“Median is in the event you lined all people up who had £100 in Premium Bonds from those that win essentially the most to those that win the least what would the individual precisely half method alongside win.
“The very first thing to say is somebody with typical luck will all the time win lower than the imply common, much less thank the three.6 per cent. What impacts the quantity you win, usually, is the quantity you’ve got bought in. The extra you will have within the nearer you’ll get to the imply common of three.6 per cent on typical luck.”
For Josie and her associate, holding £60,000 between them, he defined they may moderately anticipate returns of round 3.2 or 3.3 per cent. Nonetheless, he emphasised this determine falls considerably wanting the perfect financial savings merchandise presently on provide.
Mr Lewis added: “So then the query is, if we issue it on typical luck, how good is 3.2 or 3.3 per cent? The reply is just not very. The very best easy accessibility financial savings accounts available on the market are paying about 4.5 per cent. The highest fixes available on the market are within the 4.4 to 4.5 per cent kind vary.”
Nonetheless, the ‘tax-free’ nature of Premium Bonds might provide a profit, he recommended: “Most individuals don’t pay tax on financial savings. That is as a result of, in addition to your regular private allowance as much as £12,570 a 12 months you possibly can earn from any supply, most individuals are getting both a £1,000 private financial savings allowance – in order that’s £1,000 of curiosity they’ll earn a 12 months with out paying tax on it – or £500 private financial savings allowance in case you are a better price taxpayer.
Premium Bond Prize Fund price to drop to three.3% in April (from 3.6%) Are they nonetheless value it? https://t.co/LewPeLjAFV
— Martin Lewis (@MartinSLewis) February 24, 2026
“You’ve got bought numerous financial savings so that you might be paying tax on financial savings, you might be over that threshold. By which case if I am doing this purely on statistically seemingly returns you’re prone to get, then the following factor you need to do is be sure you’;re filling up your money ISA allowance annually, that is assuming you are not utilizing it for shares ISAs.
“Should you’ve bought a money ISA allowance out there, I might be placing it there. Then, in the event you’re paying tax in your financial savings and you’ve got crammed up your money ISA allowance, and particularly in the event you’re increased price taxpayers which implies you are going to be dropping 40 per cent off your financial savings curiosity on any that you simply pay tax on, at that time, Premium Bonds even on typical luck at round 3.2 3.3 per cent after tax begin to look good worth.”
Mr Lewis concluded by recommending individuals to put their financial savings in high-yield accounts. For individuals who relish the thrill of doubtless successful large, he proposed buying a small Lotto ticket: “To all these individuals who say ‘what concerning the thrill of successful’, sure there’s the joys of successful however, you recognize what, in the event you put financial savings account, you are going to win curiosity every month and you will know precisely how a lot you may be getting and it will most likely be larger.
“There’s a probability of successful 1,000,000, however in the event you actually need to discuss concerning the thrill of successful, then it is most likely much more wise and simpler for these individuals who do not pay tax on financial savings and who aren’t increased price taxpayers, to go and put their cash in prime financial savings after which take a few quid out and put it within the Nationwide Lottery and you then get your thrill of successful anyway however you get extra return on the underlying financial savings.”
NSandI responded: “”Premium Bonds stay one of many nation’s favorite financial savings merchandise and are a versatile and enjoyable method to save. They provide the thrill of doubtless successful tax-free prizes each month, the protection and safety of the 100% authorities assure, and easy accessibility to withdrawals.
“Each Premium Bond has a separate and equal probability of successful a prize every month, nevertheless the extra Bonds you purchase, the higher your possibilities of successful.
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“Every month we pay out tens of millions of prizes starting from £25 to £1 million. In our most up-to-date draw, there have been greater than 6.1 million prizes value over £403 million.”
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