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A Which? reader who holds the £50,000 maximum in Premium Bonds asked whether to keep them after winning prizes comparable to a competitive savings account. Money expert Michael Tomlinson said the current prize rate is 4.35% and prizes are tax-free, but individual returns are not guaranteed. The answer depends partly on the saver’s tax position and how Premium Bonds fit with other savings.
A Which? money expert says a saver holding the £50,000 maximum in Premium Bonds may find them worthwhile, particularly if they are a higher-rate taxpayer who has used their Isa allowance. Michael Tomlinson said prizes are tax-free, but returns are not guaranteed, so the saver’s experience cannot predict what they will win in future.
The question came from Jonathan in Norfolk, who said he had held the maximum amount for almost a year. He reported winning prizes worth about as much as he could have earned in a competitive savings account and asked whether recent reports of reduced odds changed the case for keeping the bonds. The source does not give the odds figures behind those reports.
Tomlinson said the prize rate had fallen from 3.6% to 3.3% in April before rising to 4.35%. That rate describes the overall proportion of the money invested that National Savings and Investments pays out in prizes; it is not a promised return for each bond holder. A saver can win more, less or nothing over a particular period.
According to Tomlinson, holding the maximum means Jonathan’s chance of winning at least one prize in a year is “all but certain.” That does not establish how much he will win: prizes vary, and a win is not the same as receiving interest at the published prize rate. The source gives no forecast of Jonathan’s likely personal return.
Tax Can Change the Comparison
The decision matters because the headline rate on a savings account is not always the amount a saver keeps. Tomlinson said Premium Bond prizes are paid tax-free, while interest from non-Isa savings may be taxable once it exceeds the saver’s personal savings allowance. In the circumstances described, Jonathan is a higher-rate taxpayer and has used his Isa allowance, according to the report.
The source says the personal savings allowance is £500 for higher-rate taxpayers and £1,000 for basic-rate taxpayers. Once a person has exceeded the applicable allowance, tax on savings interest can make an account’s net return lower than its advertised rate. A comparison should therefore account for the saver’s tax position as well as the interest rate or Premium Bond prize rate.
That comparison still cannot promise an outcome. The 4.35% prize rate is an aggregate measure, not a guaranteed yield on an individual holding. Tomlinson said a maximum holding gives Jonathan a good chance of earning more in prizes than in a savings account after tax, but the article does not calculate or guarantee that result for him. Other savers may have different tax allowances, account rates and results.
How the Prize Rate Changed
Jonathan’s question followed reports that the odds of winning had decreased. The Which? response addresses the question using the stated changes in the prize rate: it went from 3.6% to 3.3% in April, then rose to 4.35%. These are rate figures, not the odds of an individual bond winning a prize. The source provides no dates beyond the April change and no detail about when the later increase took effect.
Premium Bonds do not pay a fixed interest rate to each holder. Instead, holders enter prize draws, and the total amount paid out is set by the prize rate. Tomlinson’s central point was that returns are never guaranteed. Jonathan’s experience over almost a year is relevant to his own decision, but it does not show what he will receive in the coming year or what another holder can expect.
Tomlinson also cautioned against putting all savings into Premium Bonds. He said that doing so could mean missing better returns elsewhere. The response does not compare named providers or products, and it does not give a personalised recommendation. It frames the decision as part of a wider savings strategy, alongside the tax treatment of interest and the uncertainty of prizes.
““Returns are never guaranteed with premium bonds.””
— Michael Tomlinson, Which? money expert
Individual Winnings Remain Uncertain
The report does not state the current odds of winning, explain the recent odds change Jonathan mentions, or give the dates for the 4.35% rate. It also does not provide a calculation comparing his expected after-tax savings interest with his likely Premium Bond prizes. The published figures therefore cannot settle which option will pay Jonathan more over a specific period.
His reported winnings cover almost a year, but one person’s past result cannot establish future returns. The prize rate is not an individual guarantee, and the amount and timing of any future prizes remain uncertain. The response also does not say how much cash Jonathan needs readily available or whether he has other savings goals, factors that could affect how he allocates his money.
The recommendation is attributed to Tomlinson as general guidance in response to a reader. Which? says its one-to-one money guidance is impartial support and does not provide regulated financial advice or recommend particular products or providers. Readers’ tax circumstances and savings options differ, so the answer should not be treated as a guaranteed outcome for all Premium Bond holders.
Compare Net Returns and Needs
For Jonathan, the next practical step described by the response is to consider Premium Bonds alongside his wider savings strategy. He can compare the tax-free prizes he receives with the interest he would keep from available savings accounts after applying his personal savings allowance and any tax due. The comparison should use current rates and his own circumstances; the source does not identify a particular account or tell him to move his money.
He should also weigh the uncertain nature of prizes against the returns and access offered by other savings choices. Tomlinson’s caution was that concentrating all savings in Premium Bonds may mean missing better returns elsewhere. The Which? report sets out no coming policy announcement or scheduled review of the rate, so the timing of any further change is not established in the source.
The core question remains personal: whether the tax treatment and chance of prizes suit Jonathan’s finances better than alternatives. The available information supports a comparison, not certainty about next year’s winnings. Any decision would need to reflect changes in rates, tax allowances and his own savings needs.
Key Questions
Are Premium Bond prizes guaranteed?
No. Which? money expert Michael Tomlinson said returns are never guaranteed. The prize rate reflects the total paid out in prizes, not a fixed return for each holder.
What prize rate does the report give?
The report gives a current prize rate of 4.35%. It says the rate fell from 3.6% to 3.3% in April before rising to that level. It does not provide dates for the later increase.
Why might Premium Bonds suit a higher-rate taxpayer?
Premium Bond prizes are tax-free. The report says a higher-rate taxpayer has a £500 personal savings allowance for interest from non-Isa accounts, after which interest may be taxed. That tax treatment can affect the comparison, especially if the Isa allowance has already been used.
Does holding £50,000 guarantee a yearly win?
No prize is guaranteed. Tomlinson said a maximum holding makes a win at least once in a year “all but certain,” but the amount won remains uncertain and the source does not give the odds or a guaranteed return.
Source: rss
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