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A Which? money expert has responded to a saver with £50,000 in Premium Bonds who asked whether to keep them after hearing the odds had fallen. He says the current 4.35% prize rate and tax-free prizes may make them worthwhile for some higher-rate taxpayers, but returns are not guaranteed and other savings options should be considered.
Which? money expert Michael Tomlinson says Premium Bonds may remain worthwhile for a saver holding the £50,000 maximum, particularly if they are a higher-rate taxpayer who has used their ISA allowance. His response, published September 28, follows a reader’s question about whether to keep the bonds after hearing that the odds had decreased; Tomlinson stresses that prizes are not guaranteed.
The reader, Jonathan from Norfolk, told Which? he had held £50,000 in Premium Bonds for almost a year and had won prizes equivalent to what he could have earned in a competitive savings account. He asked whether to keep the bonds amid reports of lower odds. The article does not give his individual prize total or identify the savings account used for comparison.
Tomlinson said the prize rate had fallen in April from 3.6% to 3.3%, then risen to 4.35%. The prize rate determines the total amount paid out each month, but it is not a guaranteed return for an individual bondholder. Tomlinson said holding the maximum means the chance of winning at least one prize in a year is “all but certain.”
Tax treatment is part of his explanation. Tomlinson said Premium Bond prizes are tax-free, while interest on non-ISA savings can be taxable once it exceeds a person’s personal savings allowance. He gave the allowances as £500 for higher-rate taxpayers and £1,000 for basic-rate taxpayers. Which? says the comparison with a taxable account may make bonds more attractive for a higher-rate taxpayer who has already used their ISA allowance.
How Tax Changes the Comparison
The response highlights that comparing a Premium Bond prize rate with a savings account’s advertised interest rate may not show what a saver keeps after tax. For people whose taxable savings interest exceeds their allowance, the tax-free treatment of prizes can affect that comparison. The relevant result depends on the individual’s tax position and how much interest they would otherwise earn.
That does not make the prize rate a promise of a matching return. A bondholder’s outcome depends on prizes actually won, and the article gives no guarantee that Jonathan—or any other holder—will receive prizes equal to the headline rate. Tomlinson’s point is that the tax treatment and the chance of winning should be considered together, alongside other savings options.
The issue matters to people deciding where to keep cash because the same amount held in different products can produce different outcomes after tax, and with different levels of certainty. The response does not make a universal case for Premium Bonds: it says they may be particularly worthwhile in a specific situation, while warning that putting all savings into them can mean missing better returns elsewhere.
The Rate and the Reader’s Question
Premium Bonds are savings products whose holders can win prizes rather than receive a fixed rate of interest on each holding. In the Which? article, the reader had reached the £50,000 holding limit and had experienced prize winnings he considered comparable with a competitive savings account over nearly a year. His question followed reports of a change in the odds, but the response focuses on the prize rate and the broader savings comparison.
The reported rate moved down from 3.6% to 3.3% in April before rising to 4.35%, according to Tomlinson. The article does not state the dates of those changes or give the odds before and after the reported decrease. It also does not provide a detailed comparison with a named savings account, so readers cannot use the piece to calculate a like-for-like return for Jonathan.
Which? describes its money guidance as impartial support that does not provide regulated financial advice or recommend particular products or providers. Its published response is therefore a general explanation of factors in the decision, rather than a product recommendation tailored through a full review of the reader’s finances.
““Returns are never guaranteed with premium bonds.””
— Michael Tomlinson, Which? money expert
Individual Returns Remain Unknown
The reader’s future prize winnings cannot be established from the information in the article. It gives neither the amount Jonathan won during the year nor enough detail about the competing savings account to verify that the outcomes were equivalent. The 4.35% prize rate describes the monthly prize fund; it should not be read as a guaranteed personal return.
The report also does not set out the revised odds that prompted the question, the full prize distribution, or how often the rate may change. It does not compare specific savings products or account for every factor that could affect the reader’s decision, such as access needs or the amount of savings held elsewhere. The piece leaves those personal details unresolved.
Review Savings Alongside Tax
For the reader, the next step described by Tomlinson is to assess Premium Bonds within a wider savings strategy, including the tax that might apply to interest outside an ISA and the possibility of better returns elsewhere. Which? says its Money members and their immediate family can book one-to-one guidance sessions with its experts. The article does not announce a further change to the prize rate or a new date for reviewing the advice.
Any decision should account for the saver’s own circumstances and the fact that prize outcomes vary. Which? says its guidance is not regulated financial advice and does not recommend particular providers or products.
Key Questions
What is the Premium Bonds prize rate cited by Which??
The article says the rate is 4.35%. It reports that the rate fell from 3.6% to 3.3% in April before rising to its current level at the time of publication. The rate is not a guaranteed return for an individual holder.
Are Premium Bond prizes guaranteed?
No. Tomlinson says returns are not guaranteed. The chance of receiving prizes is different from earning a fixed rate of interest, and individual outcomes vary.
Why might Premium Bonds suit some higher-rate taxpayers?
Tomlinson says prizes are tax-free. Interest from non-ISA savings may be taxable above the personal savings allowance, which the article gives as £500 for higher-rate taxpayers and £1,000 for basic-rate taxpayers.
Does Which? say everyone should keep their Premium Bonds?
No. The response says they may be particularly worthwhile for a higher-rate taxpayer who has used their ISA allowance, but also warns that putting all savings into bonds could mean missing better returns elsewhere.
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