NS&I Premium Bonds Today, December 30: Martin Lewis Favors 4.5% Cash
NS&I Premium Bonds are back in focus today, 30 December, as savers weigh them against 4.4-4.5% easy access cash. Martin Lewis says most people will earn more from guaranteed savings than from the typical 3.2-3.3% tax-free outcome on Premium Bonds. The choice turns on tax, access, and certainty. We break down who benefits, how the cash ISA allowance helps, and year-end moves to tidy your cash for 2025.
What Martin Lewis is advising today
Martin Lewis says most savers will likely beat NS&I Premium Bonds with 4.4-4.5% easy access or short fixes, because the typical outcome on bonds is around 3.2-3.3% tax-free. Certainty matters, especially for emergency funds and near-term goals. See his warning for context in this report from the Liverpool Echo source.
Tax status is key. Basic-rate taxpayers have a £1,000 Personal Savings Allowance. Higher-rate taxpayers get £500. Additional-rate taxpayers have none. If interest pushes you over your PSA and you have no ISA space left, the tax bite on cash can tilt the maths back toward Premium Bonds, because prizes remain tax-free regardless of your income band.
Premium Bonds pay in prizes, not interest. Some people win, many do not, and returns vary month to month. Larger holdings tend to sit closer to the typical outcome over time, but small balances can fall well short. If you need a known return on a date, guaranteed rates beat the uncertainty of prize-based outcomes.
When NS&I Premium Bonds can make sense
If you pay 40% or 45% and your interest exceeds your PSA, Premium Bonds can help reduce tax drag. Prizes are fully tax-free. That can narrow the gap with 4.4-4.5% cash, especially on larger balances held for longer. Still, remember the result is not guaranteed, so avoid using them for bills or time-critical goals.
Use tax wrappers first. The cash ISA allowance is £20,000 this tax year. Fill that with the best easy access or short fixes you can find. After that, weigh Premium Bonds against taxable cash. If your interest would be taxed and you value prize potential, allocating a slice to bonds can be reasonable.
Premium Bonds are backed by HM Treasury, and you can usually cash out quickly. Many Britons also enjoy the prize element, though the rational case is mixed, as explored by The Economist source. If you are tempted, set a cap and review yearly so emotion does not overshadow the numbers.
Practical year-end cash moves
List every account, balance, and rate. If your easy access pays under 4.4-4.5%, switch. Estimate interest to see if you will breach your PSA before 5 April. Check how much of your £20,000 ISA allowance remains. If you need certainty for 2025 bills, prefer guaranteed rates over prize-based products.
Ring-fence three to six months of expenses in easy access. For money needed within 6-12 months, consider short fixes if the rate premium is worth it. For any extra cash likely to be taxed and not needed soon, consider a measured Premium Bonds slice. Review quarterly and rebalance if rates move.
Pick a clear Premium Bonds limit based on your tax band, time horizon, and risk comfort. Track monthly outcomes against your target. If your realised return trails cash by too much for too long, be ready to rotate back. Keep all emergency funds in guaranteed cash, not in prize-based products.
Key comparisons to consider
Easy access and fixed savings pay a known rate, so planning is simple. NS&I Premium Bonds can deliver less or more than the typical 3.2-3.3% outcome, but there is no promise. If you need predictable growth for a set date, guaranteed cash rates usually fit better than prize-linked returns.
Both options allow access, but easy access accounts are built for quick withdrawals without the risk of missing a prize draw cycle. If you rely on monthly cash flow, guaranteed interest is safer. Use Premium Bonds only for money you can leave untouched while you wait for possible wins.
Use your PSA and cash ISA allowance first. Once wrappers are full, higher-rate taxpayers may find Premium Bonds more attractive because prizes are tax-free. Basic-rate savers with PSA room left usually do better with 4.4-4.5% accounts. Recheck after each ISA top-up or rate change.
Final Thoughts
Here is the simple rule for today. Start with tax wrappers. Fill your cash ISA allowance and use your PSA. For money that must grow on a schedule, pick guaranteed 4.4-4.5% easy access or short fixes. For excess cash that would otherwise be taxed, you can allocate a controlled slice to NS&I Premium Bonds, but set firm limits and expect variable results. Review rates in January, confirm your PSA position, and decide your 2025 split. Keep emergency funds in guaranteed cash, and use Premium Bonds only for money you can leave alone without stress.
FAQs
Martin Lewis notes many savers will see roughly 3.2-3.3% tax-free as a typical outcome from Premium Bonds, while easy access or short fixes pay 4.4-4.5% guaranteed before tax. If you still have PSA or ISA room, the guaranteed cash rate usually wins for predictable, near-term needs.
Higher-rate or additional-rate taxpayers who have used their ISA allowance and exceeded their PSA may benefit, since Premium Bond prizes are tax-free. They suit money you do not need on a set date. Keep emergency funds and near-term spending in guaranteed easy access savings instead of prize-based products.
The cash ISA allowance is £20,000 this tax year. Use it first to shelter interest from tax. Once your ISA is full, compare taxable cash at 4.4-4.5% with Premium Bonds’ variable, tax-free prizes. If your interest would be taxed, Premium Bonds can be more appealing for a portion of surplus cash.
Yes. NS&I Premium Bonds are backed by HM Treasury, and you can usually withdraw quickly. The trade-off is return uncertainty. You might earn less than 4.4-4.5% cash. If you need steady income or have bills soon, guaranteed easy access savings provide clearer planning and fewer surprises.
Set a cap based on tax band, time horizon, and risk comfort. Many savers keep emergency funds in easy access, use short fixes for known dates, and hold only a measured slice in Premium Bonds. Review quarterly. If results lag cash by too much, reduce your Premium Bonds share.
Disclaimer:
The content shared by Meyka AI PTY LTD is solely for research and informational purposes. Meyka is not a financial advisory service, and the information provided should not be considered investment or trading advice.
