Martin Lewis gives his verdict on which Premium Bonds savers are most likely to benefit
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Martin Lewis and Angellica Bell were on hand to cover a wealth of money matters throughout the programme. During the latest episode of the ITV money show, the presenters addressed the recent rate cut to Premium Bonds.
Earlier this week, NS&I – which stands for National Savings and Investments – unveiled the winners for the December 2020 Premium Bonds prize draw.
This month marked the first draw since the annual prize fund rate was cut.
On November 24, the rate reduced by 40 basis points from 1.4 percent to one percent.
From December 2020, it’s meant the odds of winning have changed.
Formerly 24,500 to one, the odds of winning per £1 Bond number is now 34,500 to one.
This evening, Martin gave ITV viewers a break-down on what Premium Bonds are, and what the annual prize fund rate means for savers.
During his explanation, he pointed out the smallest prize that a person can win is £25.
The jackpot prize is £1million – with two people securing a payout of this size in December 2020.
Martin explained that to “properly evaluate” Premium Bonds, he would use the median average.
Having shown the calculations, he continued: “In fact, 70 percent of people with £1,000 in Premium Bonds win nothing [over a year].
“But the more you have in Premium Bonds, the closer you start to get to that prize fund rate of one percent.
“So with £10,000 – typical luck, £75. That’s 0.75 percent.
“With the full, the maximum, £50,000 – typical luck, you would win £450. That’s 0.9 percent.”
“That then allows us to start comparing with the top savings accounts.”
Currently, the top paying easy access savings account pays just 0.6 percent, according to Moneyfacts at the time of writing.
The financial journalist also highlighted that those “very few people” who use up their Personal Savings Allowance may be drawn to this form of savings due to the ability to save tax-free.
“Well, in that case, because Premium Bonds are tax-free, that’s a big boost for you. Especially if you’ve got more, Premium Bonds become a really good odds.”
He concluded: “Finally, there are some of you saying, ‘I haven’t got much money. I’m going to earn diddlysquat interest – half a percent on two or three hundred pounds is nothing. I don’t care about the interest, I just want somewhere safe to put my money, and I do like the appeal of the chance of winning £1million.'”
Martin added: “Well, then, put your money in Premium Bonds if you want.”
The Martin Lewis Money Show continues on Thursday at 8.30pm on ITV.
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