Martin Lewis sends message to anyone buying NS&I Premium Bonds for children

Martin Lewis has suggested that purchasing Premium Bonds for children may not be the best present this Christmas.

Savings platform NS&I, which is backed by the Treasury, offers tax-free cash prizes each month worth between £25 and £1 million. Children under 16 are allowed to hold Premium Bonds worth up to £50,000, making them a popular gift for youngsters.

However, money saving expert Mr Lewis has questioned why so many parents buy Premium Bonds for their children when most will never win anything. Speaking on This Morning on ITV, Mr Lewis said he was "not a fan" of giving Premium Bonds to children and explained that regular savings accounts may be better.

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Mr Lewis said unless you have a lot of money saved in Premium Bonds, or you pay tax on your savings, Premium Bonds may not be worth it. The finance expert was asked by a mother of triplets whether Premium Bonds would be a good option for saving for her children. Mr Lewis said "many many parents" choose to purchase them, but he admitted he found it "a bit strange".

He told the caller: "When I do my show and I talk about who Premium Bonds are best for I normally explain it's for people who have got near the maximum - which is £50,000 - and people who pay tax on savings interest. Now children very rarely have near the maximum and they will rarely pay tax on savings interest."

Mr Lewis explained that when you have Premium Bonds, the interest you get is "based on a prize draw of whether you'll win or not". He said that statistically, someone with £,1000 in Premium Bonds over a year with typical luck "will win nothing".

"The less you've got in, the less likely you are to win the prize rate with typical luck," Mr Lewis said. "So if you're talking about putting £200, £300, £400 in for the kids, well the most likely outcome is that they will not win anything at all, and you'd be better just putting it in a normal savings account."

He added: "If you're putting over about £3,000 it gets a bit better, they'll still - with typical luck - not be winning as much as they would earn interest in a normal savings account. But if you happen to have loads of money and you were paying interest on your savings so that they may be charged on their savings and therefore could be paying tax and you were putting in £30,000, £40,000 or £50,000, the Premium Bonds wouldn't be bad for kids. But most people aren't doing that. So I'm not a big fan of Premium Bonds for children. Loads of people do it, but I'm not a big fan."

It comes as the prize rate is set to drop from the January draw, down from 4.15 per cent to 4 per cent. The odds of winning in January will remain the same as in December – at 22,000 to one.

The changes include an estimated 82 prizes of £100,000 in January, down from 83 in December. There will be an estimated 166 prizes of £50,000 in January, down from 167 in December. The estimated number of £1 million prizes will remain the same, at two.

Andrew Westhead, NS&I retail director, said: “We carefully review our savings rates in response to changes in the broader market. These adjustments help us meet our net financing target while balancing the interests of our savers, taxpayers and the wider financial services sector.

“Premium Bonds remain a popular choice for millions of savers, backed by the 100 per cent Government guarantee, with the January 2025 draw set to deliver over 5.8 million tax-free prizes worth more than £431 million.”