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Which? money expert Michael Tomlinson says a saver holding £50,000 in Premium Bonds has an almost certain chance of winning at least one prize in a year, but the value of prizes is not guaranteed. He says tax-free prizes may compare favourably with taxable savings interest for a higher-rate taxpayer who has used their ISA allowance, while stressing the need to consider other savings options.
Which? has advised a reader who holds £50,000 in Premium Bonds to weigh the tax-free prizes against the lack of guaranteed returns and the rates available elsewhere. Money expert Michael Tomlinson said the maximum holding gives the saver an “all but certain” chance of winning at least one prize in a year, but that does not guarantee a particular return.
The reader, identified as Jonathan from Norfolk, said he bought the maximum holding almost a year earlier and had won prizes equivalent to what he would have earned in a competitive savings account. He asked whether to keep the bonds after reports that the odds of winning had decreased. The supplied report does not give a date for Jonathan’s letter or specify which odds reports he meant.
Tomlinson said the amount paid out each month is determined by the prize rate. In the figures cited by Which?, the rate fell from 3.6% to 3.3% in April and later rose to 4.35%. The source does not state the years for those rate changes. A prize rate is not a personal return: individual holders’ outcomes depend on the prizes they win, and no prize amount is assured.
Which? says the reader is a higher-rate taxpayer who has used his ISA allowance. Tomlinson said those circumstances can make Premium Bonds particularly worthwhile because prizes are tax-free, while interest from non-ISA savings accounts may be taxable above the personal savings allowance. He cited allowances of £500 for higher-rate taxpayers and £1,000 for basic-rate taxpayers.
Tax Can Change the Comparison
The decision matters because comparing a Premium Bond prize rate directly with a savings account’s advertised interest rate can leave out the effect of tax. For a saver whose taxable interest exceeds their allowance, the amount kept after tax may be lower than the headline interest. The supplied report’s example is a higher-rate taxpayer who has already used an ISA allowance; it does not establish that the same calculation applies to every saver.
There is also a difference between a possible average outcome and an individual result. Premium Bonds do not promise a set return, so a holder may receive prizes worth more or less than interest from a savings account over a particular period. Jonathan’s experience over almost a year is useful information about his own holding, but it cannot establish what he or another holder will win in future.
Tomlinson cautioned that putting all savings into Premium Bonds could mean missing better returns elsewhere. That concern is relevant even for people who value tax-free prizes: the comparison depends on available accounts, tax position, access needs and the uncertainty of prizes. The source gives no specific alternative account rate or personalised calculation.
How the Report Frames the Choice
The Which? report is a response to an individual reader’s money question, rather than an announcement of a new Premium Bonds policy. Its focus is the reader’s circumstances: the maximum holding, a year of prize results comparable to savings interest, higher-rate tax status and an ISA allowance already used. Those details explain why the expert discusses tax alongside the chance of winning.
The reader referred to reports of reduced odds. Tomlinson’s answer, as supplied, addresses the prize rate changes and the likelihood of at least one annual prize for someone holding the maximum amount. It does not give the odds before and after a change, or explain how any change would affect the expected value of an individual holding. The article therefore cannot support a precise odds comparison.
Which? describes its one-to-one money guidance as impartial support and says it does not give regulated financial advice or recommend particular products or providers. That framing is relevant here: the response sets out considerations for the reader but does not issue a universal recommendation to retain or cash in Premium Bonds.
““Returns are never guaranteed with premium bonds.””
— Michael Tomlinson, Which? money expert
Future Prizes Remain Uncertain
The supplied report does not state the publication date, the years associated with the April rate reduction and later increase, or the exact date on which the 4.35% rate applied. It also does not provide the current prize rate or current prize odds. Readers should not treat the figures quoted as a live update without checking a current source.
It is also unclear how much Jonathan actually won, which savings account he used for comparison, or whether his comparison included tax. The source reports that his prizes were equivalent to what he would have earned with a competitive account, but provides no figures to independently assess that claim. Nor does it specify the size of his savings beyond the Premium Bonds holding.
The annual chance of winning at least one prize does not reveal how much a holder might receive. The report does not give a distribution of possible outcomes, a guaranteed minimum return, or a personalised forecast. The impact of the cited tax allowances will also depend on a saver’s circumstances and taxable interest from other accounts.
Compare Options Before Deciding
For a saver considering the same question, the next step described by Tomlinson is to look at the wider savings strategy: compare the likely after-tax interest from eligible savings accounts with the uncertain value of Premium Bond prizes, while considering whether keeping all savings in one place could mean missing other returns. The figures in this report alone do not settle that calculation.
Which? says eligible Money members and their immediate family can book one-to-one guidance sessions with its money experts. It says the service covers subjects including savings and tax, and that the experts do not recommend particular products or providers. The supplied material does not say whether Jonathan took up that offer or what decision he made.
Any decision remains personal. Premium Bond prizes can fluctuate and may be lower than expected; savings-account interest can also vary by provider and account terms. The report provides no forecast of future prizes or interest rates. This is a report on Which?’s response, not personalised financial advice; savings products carry risks, and returns are not assured.
Key Questions
No. Tomlinson said the maximum holding makes the chance of at least one prize in a year “all but certain”, but he also said returns are never guaranteed. The report does not promise a prize or a particular amount.
Why might Premium Bonds suit some higher-rate taxpayers?
Prizes are tax-free, according to the report. Tomlinson said this may make them worthwhile for a higher-rate taxpayer who has used their ISA allowance, because interest from non-ISA accounts can be taxable above the personal savings allowance. The result depends on individual circumstances.
What prize rate does the report cite?
It says the rate fell from 3.6% to 3.3% in April and later rose to 4.35%. The supplied source does not give the years or confirm that 4.35% is the current rate.
Should a saver keep all their savings in Premium Bonds?
The report does not make that recommendation. Tomlinson warned that putting all savings into Premium Bonds could mean missing better returns elsewhere. Holders should compare options and account for tax, access needs and uncertain prize outcomes.
Source: rss
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