Personal finance experts reckon they are a attractive proposition for anyone who has maxxed out their £20k cash ISA allowance.
Warning for state pensioners who have money in NS&I Premium Bonds
A Premium Bonds HMRC tax rule change warning has been issued – if you were born after a certain year. Discussing Premium Bonds, personal finance experts reckon they are a attractive proposition for anyone who has maxxed out their £20k cash ISA allowance.
And this cash ISA allowance is becoming smaller in the coming years under the Labour Party government – meaning more savers should be mulling over NS&I Premium Bonds. Nick Robinson, managing director of Yorkshire Accountancy, said: “If you have already used your cash ISA allowance and your taxable interest is likely to exceed your personal savings allowance (PSA), the tax‑free prize route can be relatively attractive while keeping full HM Treasury backing and easy access.
“The trade‑off is that returns are unpredictable and many savers will earn less than the best easy‑access or fixed‑rate accounts over time, especially if they are still within their tax‑free allowances.
READ MORE Graduated Driving Licence update for drivers aged 17 to 23 in England and Wales
“The case for Premium Bonds strengthens as your tax rate rises and weakens when you value guaranteed interest above all else.”
Under new cash ISA rules, from April 2027, you will only be able to deposit up to £12,000 as you see fit. But older savers are spared because the new rules will only apply to those aged 65 and over.
This means if you were born before April 1962, the new rules will not apply to you. Mr Robinson said: “Most retirees prioritise certainty of income and capital, so Premium Bonds rarely fit as a core holding.
“Guaranteed accounts and cash ISAs make planning withdrawals far easier, and your mix can be tailored around tax allowances such as the personal savings allowance and, where relevant, the savings starting rate.
“Premium Bonds can still play a small supporting role for surplus cash you do not need to spend, offering safety, liquidity and the chance of tax‑free prizes without affecting your tax bill. For day‑to‑day income needs, though, predictable interest usually serves better.”