Martin Lewis shares amount of Premium Bonds needed to win as prize rate falls

More than 24 million people in the UK have NS&I Premium Bonds and will be impacted by a change coming into force in April 2025. As it currently stands, each bond is placed into a monthly draw, with prizes from £25 to £1million up for grabs, but in just a few months, the prize fund rate is being cut.

From April it will be reduced from 4% to 3.8% tax-free, and the number of prizes available will be reduced, with the number of £100,000 prizes expected to drop from 82 in February to 78 in April. Similarly, the number of £50,000 prizes will go from 164 to 157, while £25,000 prizes will decrease from 328 to 313, and the number of £10,000 prizes will also fall from 820 to 781.

The number of prizes available will drop for each value, apart from the £1million jackpot and the smaller £25 ones. There will still only be two winners of £1million, but the amount of £25 prizes will increase from 1,807,915 to an estimated 2,170,903 in April.

Despite these changes, the odds of winning remain the same at 22,000 to one for every £1 Bond in the prize draw. According to NS&I the April 2025 Premium Bonds draw is expected to have over £411million in the prize fund, with more than 5.9 million prizes up for grabs.

For the uninitiated, Premium Bonds are run by the government-owned National Savings and Investments (NS&I). Customers are able to put away between £25 and £50,000 in a secure account, and don’t have to pay tax on any earnings. No interest is paid on these investments, but each £1 bond is placed into a monthly draw, with prizes from £25 to £1million divvied out among the 121 billion eligible.

Although it’s possible to win with even a single bond, your odds increase the more you amass. But according to Martin Lewis, many savers could have better luck elsewhere. In a post on X in December 2024, personal finance guru Martin Lewis, wrote: ‘Why do so many people give children Premium Bonds? Premium Bonds are only a decent bet if you’ve a big whack in, say £10,000+ and you pay tax on savings interest.

‘Most kids have/do neither. With £1,000 in over a year with typical (median average) luck you’ll win nothing.’. Some commenters felt otherwise, including one who replied: ‘Completely disagree. We’ve had returns that easily outstrip interest rates.’.

‘Statistically, I’ve done a lot better with premium bonds than anything else – especially during lockdown when interest rates were practically nothing,’ said another. However, Martin’s viewpoint does have some truth in it. In December’s Premium Bond draw, £62million was handed out in total across 20,791 high-value prizes, but the two lucky Brits who became millionaires held £50,000 and £33,275 each in bonds.

The likelihood you’ll take home one of the two top monthly prizes of £1 million is around 1 in 60 billion per bond. Putting that into perspective, the odds of nabbing the National Lottery jackpot is roughly 45 million to 1. That said, there are outliers, and it all comes down to luck. The December 2024 draw saw one £100,000 winner with just £25 invested and others with as little as £1,000.

A recent post on the Money Saving Expert website reinforced the idea that Premium Bonds may not be the best option for ‘most savers with average luck, who don’t pay tax on savings interest’. It claimed many people would be better off with a regular savings account, as these give you a ‘guaranteed return in the form of interest’.

‘If you get the top easy-access cash ISA rate of 5.05%, you’d get £50.50 in interest a year for every £1,000 saved,’ the post explained. Although, it’s worth noting the interest rate can go up and down over time, but even factoring this in, with a regular account you’ll still know what you’ll earn at any given point, while those with Premium Bonds could be saving the same £1,000 thinking they’ll get something extra each month and be in with a chance of scoring £1million, but ultimately win nothing time and time again.

They add: ‘You’re actually likely to get quite a lot less than the new and current prize rates of 3.8% and 4% and there’s a negligible chance of winning a million.’. Still not sure where’s best for your money? Martin Lewis offers a handy calculator on the Money Saving Expert site so you can assess whether you’re likely to earn more with this method or a traditional savings account.

Many higher rate taxpayers prefer Premium Bonds (at least as part of a wider portfolio) because the earnings are tax free. Others enjoy the ‘game’ element, or like the fact you can readily withdraw without any fees. Life admin apps to save the day? Brits rely on seven pocket pals for budget control.

According to NS&I though, they may not be for you if you want a regular income, are looking for guaranteed returns, are concerned about inflation, or want to save jointly with someone else. Do you have a story to share?. Get in touch by emailing MetroLifestyleTeam@Metro.co.uk.