You’re almost certainly referring to **Premium Bonds**.
Martin Lewis, the founder of MoneySavingExpert.com, frequently champions Premium Bonds, but crucially, he also wants people to understand exactly how they work and if they’re right for them.
Here’s why they fit the description:
1. **”Little-known investment”:** While many people have heard of them, their unique mechanism (prize draw instead of interest) isn’t always fully understood, especially compared to traditional savings accounts or investments. Many people still think of them as a “bet” rather than a form of savings.
2. **”Martin Lewis wants you to understand”:** He regularly features them on his shows and website, explaining their pros and cons, who they’re best for, and how the “effective interest rate” actually works (or doesn’t work for many individual bond holders).
**What Premium Bonds are:**
* They are a savings product offered by **NS&I (National Savings and Investments)**, which is backed by the UK government. This means your capital is 100% safe.
* Instead of earning interest, your money is entered into a **monthly prize draw**.
* Prizes range from **£25 to £1 million**, all of which are **tax-free**.
**Why Martin Lewis explains them so much:**
* **Tax-Free Winnings:** This is a huge draw, especially for higher-rate taxpayers or those whose savings interest would push them over their Personal Savings Allowance.
* **Capital Security:** Your money is 100% safe as it’s government-backed.
* **The “Thrill”:** The chance of winning a life-changing sum.
* **Misunderstanding of the “Effective Interest Rate”:** He consistently clarifies that while NS&I publishes an “average prize rate” (e.g., 4.65%), this is an average across all bonds. In reality, the median return for a single bond holder is often **0%** (meaning most people win nothing, or very little). You need a significant sum invested for a reasonable chance of getting anywhere near the advertised rate.
* **Who They’re Best For:** He often advises considering them for:
* Higher-rate taxpayers.
* Those with significant savings who have already maxed out their ISA allowances.
* Anyone who values 100% capital security and the chance of a big win, over a guaranteed (but taxable) return.
* **Who They’re NOT Best For:** People who need a guaranteed return, or those with small amounts of savings where the chances of winning are extremely low, and they might be better off in a top-paying easy-access savings account.
In essence, Martin Lewis wants people to see Premium Bonds as a legitimate savings option, but to go into it with open eyes, understanding that while the *potential* for a great return is there, the *probability* of winning anything substantial (especially with smaller investments) is low, and many people will effectively earn no return.
