Martin Lewis issues NS&I £1,000 warning to anyone who puts money in Premium Bonds

Money-saving guru Martin Lewis has flagged a caution to those considering Premium Bonds as gifts for children, highlighting that they might not make a sound financial gift unless a significant amount is invested. According to Martin, the standard yearly investment of £1,000 often fails to yield any prize, potentially making it an unfruitful endeavour.

Each month, Premium Bond holders are entered into a draw with the opportunity to claim prizes ranging from £25 to £1 million tax-free. Having said that, specialists point out that heftier prizes generally favour those who invest larger sums.

To get in the game, investors must commit at least £25 and can continually purchase up to a ceiling of £50,000 worth of bonds. More pounds mean more bond numbers, hence increasing the likelihood of winning per pound staked.

Martin Lewis urged potential investors to ponder wisely before diving into the world of Premium Bonds. He asked: "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."

Mr Lewis has previously explained that money placed in Premium Bonds was “as safe as it gets” because they are “backed up” by the Government. He said: “Every penny you've got in there is backed up by the government. The only way you could have a problem is if the government went bust - then we'd all have bigger problems.

“In other words, you're always at worst going to get your money back. Each individual bond goes into a prize draw and has a chance of winning an amount of money, from £25 up to a million pounds. And that's what dictates the interest that you get. So your interest is a gamble, but your money is totally safe."

He then exposed a commonly believed myth among people who invest in Premium Bonds. Mr Lewis said: “"I often get asked, I've had my Premium Bonds a long time but haven't won anything, will I be better off buying new bonds because they seem to win more? Complete urban myth.

“Every bond has the same chance of winning in the prize draw as every other bond. The reason more new bonds win is because there are more new bonds. When people were buying these bonds in the 1960s and 1970s, they were buying £1, £10, £20 worth. Now people are buying £500, £1,000, £10,000 worth.

“So, there are just simply more new bonds, so more new bonds win more often. That tends to just be a fiction as people in those areas have more Premium Bonds."