Martin Lewis explains when Premium Bonds are a ‘good deal’ | Personal Finance | Finance

May 5, 2026 2,420

Martin Lewis on ITV

Martin Lewis has shared some tips in his BBC podcast (Image: ITV)

Martin Lewis has shared some thoughts on Premium Bonds and who they suit as a savings vehicle. This comes after provider NS&I recently made some key changes to the rules for the savings scheme.

With Premium Bonds, rather than your holdings growing in line with an interest rate as with a conventional cash savings account, each £1 Bond you hold goes into a monthly prize draw. Every Bond has the same chance of being paired with a prize, and you can win huge cash prizes such as for £50,000, £100,000 or £1million.

But the vast majority of prizes are for small amounts such as £25 and £50, plus you can go months or even years without winning anything. Mr Lewis had some words to say about the savings scheme on his BBC podcast.

He was answering a question from a husband and wife who were asking how best to use a £400,000 lump sum that would soon be heading their way, as they were selling a flat in London. They said they were planning to use the funds to buy another property relatively soon, although it could take a year or more.

General rule

The person said they had both used their full £20,000 ISA allowances and were planning to each buy £50,000 in Premium Bonds, which is the maximum amount you can hold in Bonds. On this question of Premium Bonds, Mr Lewis said: “Generally I pooh-pooh Premium Bonds because the rate isn’t that high and for most people, unless you’re maxing it out and you pay tax on your savings, with typical luck, you would beat it in normal savings.”

However, Mr Lewis said that this particular couple’s case was an exception to the rule. He said: “But you are maxing it out and you do pay tax on your savings, so therefore it becomes quite a good deal for you.”

It’s worth bearing in mind here that the prize fund rate for Premium Bonds has recently dropped. From the April prize draw, NS&I cut the rate from 3.6 percent to 3.3 percent. The odds of each £1 Bond winning was also reduced, from 22,000 to one to 23,000 to one.

Meanwhile at the time of writing, many top-paying easy access accounts offer rates of 4.5 percent or above. Calculations by Money Saving Expert suggest that with average luck, if you hold just £1,000 in Bonds, you will nothing on average.

If you have £10,000 in holdings, you will win just £275 a year in prizes on average. Should you hold the maximum £50,000, you would take home £1,450 a year on average. But you could earn £2,250 in interest by putting this same amount in an account earning 4.5 percent.

New savings product

Mr Lewis pointed to a recently launched savings product from NS&I that may be worth looking at. He spoke about a range of fixed rate bonds recently launched by NS&I.

A key advantage of savings with NS&I is that as the provider is Government-run, all of your holdings are backed by the Treasury. Mr Lewis explained: “All the money is Government backed, because it’s state owned.”

This is different from the standard up to £120,000 protection that applies under FSCS rules (Financial Services Compensation Scheme) should your savings provider go bust. This up to £120,000 protection applies per person, per financial institution.

However, it is worth noting here that FSCS also has some ‘temporary high balance’ rules offering bigger protection, such as if you complete a sale of a house or inherit an amount. In these cases, you get up to £1.4million protection, again applying per person, per financial instution.

You can put up to £1million in these new fixed rate accounts from NS&I, with all your funds protected. Mr Lewis said the rates on the new bonds are surprisingly competitive.

He said: “Normally, the rates in NS&I fixed rate savings are way below the best buys. The rates of these are only about 0.2 percent below the best buys.”