Money saving expert Martin Lewis reveals whether premium bonds are worth investing in – and admits ‘it’s complicated’

Martin Lewis has said premium bonds are worth investing in – but only for ‘some people’.

Ahead of his live show in Manchester this evening, the money saving expert, 51, appeared on ITV‘s This Morning  to answer viewer’s financial questions.

One caller, Rebecca, phoned the programme to ask whether premium bonds are worth investing in to maximise her savings.

Martin explained that for most people premium bonds probably aren’t worth investing in, as the return rate is likely to be less than what investors can get from top savings accounts. 

The expert told presenters that the worth of premium bonds depends on an individual’s personal financial circumstances, even though ‘quite a lot of people have to win nothing’. 

Martin Lewis (pictured) answered a caller’s question: ‘Are premium bonds worth considering?’ on ITV’s This Morning earlier today 

 ‘The premium bond prize rate is 4.65 per cent, which is less than the top saving accounts,’ he said.

‘But actually if you have typical luck, which is based on the median average, you’ll earn less than 4.65 per cent.’

‘Think about it this way, for every person that wins a million quid, quite a lot of people have to win nothing. 

‘Which is why, on average, with typical luck you get less than 4.65 per cent, so who are premium bonds good for?’

In answering his own question, Martin explained: ‘So, as a general rule of thumb, if you are a higher or top rate taxpayer and you have enough savings that you pay interest on it, and you’re looking at putting a larger amount of £30,000- £50,000, they can be a pretty good bet.’

He added: ‘Also, you’re more likely to win…the more you’ve got, and the maximum is £50,000.’

However, for Brits looking to put in a smaller amount of money, Martin suggests that premium bonds might not be the best method.

He said: ‘If you’re looking to put a few hundred quid in and you don’t pay tax on your savings, you would be a lot better off in normal savings were you’re guaranteed to get the interest.’

Rylan Clark (pictured left) and Cat Deeley (pictured right) presented Martin Lewis with viewers' money queries

Rylan Clark (pictured left) and Cat Deeley (pictured right) presented Martin Lewis with viewers’ money queries 

What are premium bonds?

Premium bonds are a savings account where the interest paid is decided by a monthly prize draw.

Investors buy £1 bonds, and each have an equal chance of winning – meaning the more bonds an individual purchases, the higher their chances of winning.

Every four weeks, premium bond numbers are chosen at random and two bond-holder’s pockets £1m each. Other prizes range from £25 to £100,000.

With more than 24 million people saving £121 billion in them, Premium Bonds are the UK’s biggest savings product, according to Martin’s website MoneySavingExpert.

According to NS&I, the odds of winning at least £25, which is one of the lowest prizes, is one in 21,000.

That’s why many Brits have struggled to decide whether premium bonds are worth investing in – including the caller on This Morning.

The expert concluded: ‘That is a big simplification and summary on whether it’s worth it or not, because it’s a lot more complicated than you think because premium bonds are all about whether you win the prizes; we’re looking at multi-nominal probability to decide if it’s right or wrong for you.’

Presenter Rylan Clark queried: ‘When it comes to premium bonds… whether you win or not, you can always withdraw the exact amount of money that you put in, is that correct?’

Martin clarified Rylan’s query, and said: ‘That is correct, your capital is safe, it’s a savings account where the interest is dictated by the lottery.

However, Martin explained that other accounts might be more worthwhile.

‘I said Metro Bank before, which happens to be today’s top easy access account that pays 5.22 per cent – so you’re guaranteed to get 5.22 per cent in Metro bank, but you’re not guaranteed to get 4.65 per cent [with premium bonds],’ Martin explained.

He concluded: ‘Yes, you can take your money out, but you can take your money out of any easy access account.’