TL;DR
Get your next haul delivered free — and shop member deals
- Fast, free delivery on millions of items
- Access to Prime Big Deal Days deals on October 6–7
- Prime Video, Amazon Music and more included
A Which? money expert says Premium Bonds may suit a higher-rate taxpayer who has used their Isa allowance, because prizes are tax-free and interest on other savings may be taxable. The reader holds the £50,000 maximum and has won prizes comparable to a competitive savings account, but future returns are not guaranteed.
A Which? money expert says Premium Bonds may be worth keeping for a higher-rate taxpayer who has already used their Isa allowance, after a reader with the £50,000 maximum holding asked whether to stay invested. The reader, Jonathan from Norfolk, said his prizes over almost a year had matched what he could have earned in a competitive savings account; the expert cautioned that Premium Bond returns are never guaranteed.
Jonathan told Which? he bought the maximum permitted amount of Premium Bonds almost a year before writing in. He said his prizes over that period were equivalent to the returns he estimated he would have received from a competitive savings account. His question followed reports that the odds of winning had decreased, although the published response focuses on the prize rate and the chance of winning rather than giving the odds or a detailed calculation of his results.
Which? money expert Michael Tomlinson said holding the maximum amount makes winning at least one prize in a year “all but certain.” That wording describes the likelihood of receiving a prize, not a guaranteed return of a particular size. The amount paid out across prizes each month is set by the prize rate, which Tomlinson said fell from 3.6% to 3.3% in April and later rose to 4.35%. The report does not state the dates for those rate changes.
Tomlinson said the decision should be considered alongside a saver’s wider finances. He warned that putting all savings into Premium Bonds risks missing better returns elsewhere. In Jonathan’s case, the expert said the tax treatment could make the bonds more attractive: Jonathan is described as a higher-rate taxpayer who has used his Isa allowance, and Premium Bond prizes are tax-free.
Tax Can Change the Savings Comparison
The comparison for Jonathan is not simply the prize rate against the headline interest rate on a savings account. According to Tomlinson, interest earned in non-Isa accounts is taxable when it exceeds the personal savings allowance: £500 for higher-rate taxpayers and £1,000 for basic-rate taxpayers. Premium Bond prizes, by contrast, are paid tax-free.
That difference can affect how much a saver keeps after tax. Tomlinson said a higher-rate taxpayer who has exhausted their Isa allowance may have a good chance of receiving more in prizes than they would keep from savings-account interest after tax. This is his assessment of the circumstances described, not a promise of a particular result. For readers, the practical point is to compare likely after-tax interest with the uncertain prizes they could receive, while considering how much of their savings is held in each place.
The Rate and the Reader’s Circumstances
The Which? item is a response to a personal finance question, rather than a report of a new change to Premium Bonds. Jonathan asked whether to keep his holding after hearing that the odds had decreased. The supplied report gives no odds figures, dates for the rate changes, or details of the specific savings account used for his comparison.
Tomlinson’s answer rests on three details supplied about Jonathan: he holds £50,000, is a higher-rate taxpayer, and has already used his Isa allowance. The tax comparison would differ for someone with another tax status or unused Isa capacity. His past prizes are also a record of what happened over almost a year, not evidence that the same amount will arrive in future.
““Returns are never guaranteed with premium bonds.””
— Michael Tomlinson, Which? money expert
Future Prizes and Comparisons Remain Uncertain
The report does not say how much Jonathan won, which savings account he used as a comparison, or whether his calculation included tax on interest. Without those details, readers cannot independently compare his actual outcome with a specific alternative. It also gives no figures for the odds that prompted his question.
Even with the maximum holding, a likely prize is not the same as a predictable annual return. The article does not estimate the range of prizes Jonathan could receive in a future year or say how long the quoted 4.35% rate will apply. It also does not compare Premium Bonds with particular accounts or provide a personalized recommendation. The right choice depends on the saver’s tax position, available alternatives and tolerance for variable results.
Compare After-Tax Options Before Deciding
The next step for a saver considering the same question is to compare expected savings-account interest after tax with the uncertain Premium Bond prizes, using their own tax allowance and Isa position. They can also review whether holding all savings in one place fits their wider savings needs. The Which? response does not say whether Jonathan decided to keep or withdraw his bonds.
Which? says its Money members and their immediate family can book one-to-one guidance sessions with its money experts. The service is described as impartial support to help members make more confident financial decisions; Which? says it does not give regulated financial advice or recommend particular products or providers.
Key Questions
Are Premium Bond returns guaranteed?
No. Which? money expert Michael Tomlinson says returns are never guaranteed, even when a saver holds the maximum amount.
What prize rate does the report give?
The report says the rate fell from 3.6% to 3.3% in April and later rose to 4.35%. It does not provide the dates for those changes.
Why might Premium Bonds suit a higher-rate taxpayer?
Tomlinson says prizes are tax-free, while interest from non-Isa savings accounts may be taxable above the £500 personal savings allowance for higher-rate taxpayers. The comparison depends on the saver’s own circumstances and alternative rates.
Does holding £50,000 guarantee a prize?
Tomlinson describes the chance of winning at least one prize in a year at the maximum holding as “all but certain.” The report does not say a prize is guaranteed, or guarantee how much a saver will receive.
Source: rss
Fall Picks
fall essentials
As an affiliate, we earn on qualifying purchases.
