Martin’s Savings Interest Masterclass: increase what you earn by up to 50%!

Martin Lewis gives you his savings interest Masterclass, helping you maximise every penny. He covers cash ISAs, fixed savings, regular savers, putting money away for a home, how savings tax works, how safe savings are, and more! If you have a question for Martin, you can ask him in his Question Time podcast! Email your question to [email protected] mailto:[email protected] and you could be on the show!

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Speaker 00

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• 0:10Speaker 00

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  Join me, Colin Morgan, as I read Frankenstein by Mary Shelley. A story of science and ambition, loneliness and longing, and what it truly means to be human.

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• 0:37Martin Lewis?

  Hello, I'm Martin Lewis and this is the cunningly named The Martin Lewis Podcast. I do wonder what that's going to be about. Usually, much of it comes from my BBC Radio 5 live show with Adrian Charles, but there's also lots of bonus money-saving tips for you lucky, lucky podcast listeners. I should cocoa. In today's pod, it's a savings masterclass, how to maximise your interest, all about cash ISAs, the 25% boost on lifetime ISAs, earn 7% interest on regular savings accounts, get a 50% boost if you can open a Help to Save account, how tax on savings interest works, how do you pay tax on savings interest, how safer savings, and so much more.

• 1:19Martin Lewis?

  Plus, hurrah and huzzah, it looks like, finally, financial education is to be taught in every state school in England. This week's tellers: do you love your job and would you recommend it to others? And in the mastermind, I put our Adrian to the test on his knowledge of charity. If you donate, can you claim some tax back? Let's get to it. Play the theme tune.

• 2:00Speaker 02

  How are you, Martin?

• 2:02Martin Lewis?

  I'm all right. I had a bad night's sleep.

• 2:04Speaker 02

  Oh, no, I'm sorry.

• 2:05Martin Lewis?

  I woke up at 2 in the morning. I've had a lump on my toe, I don't know what it is, my little toe, for five days. I woke up at 2 in the morning with it throbbing with intense pain. My little toe, even touching the bed sheets, was agony. I took, eventually I ibuprofen, I got to sleep after a couple of hours. I went to the doctors this morning, thinking, is it gout? Because that's what, you know, Google and others had told me. And I went in and she looked and she said, no, it's a bite. I think it's an infected spider bite. Now, on one hand, I've got some topical antibiotics, I'll be putting it on, you know, you don't want it, it's painful. On the other hand, it might be a radioactive spider. Maybe next week I'll be able to sling webs and slingshot off buildings and fly through the sky. So there's a little bit of excitement in my Marvel household, but

• 2:50Martin Lewis?

  I may, you know, things might be about to change. I mean, not all superheroes wear capes. Spider-Man doesn't, but I might, you know?

• 2:57Speaker 02

  Okay. And can I have a look at this toe before?

• 3:01Martin Lewis?

  I think you can, we'll do it in the news, news period.

• 3:03Speaker 02

  All right.

• 3:03Martin Lewis?

  Okay.

• 3:04Speaker 02

  Looking forward to that. But before we get on to the savings...

• 3:07Martin Lewis?

  Only if you get Mastermind right. If you get Mastermind right, I'll show you my toe.

• 3:10Speaker 02

  Show you. Every week you show me a part of your body.

• 3:14Martin Lewis?

  Let's not go there. That's not what I said. I was specific on toe, mate.

• 3:19Speaker 02

  You were. Before we get to the savings masterclass, now we've had toe news, there's a curriculum review announcement this week, cropped up in a press release, was not other than Martin Lewis?

• 3:32Martin Lewis?

  Yeah, there was. Many people know I've been campaigning to get financial education on the national curriculum since 2010. We got it on in 2014. This is the England, English, England National Curriculum Review. But that was a pyrrhic victory, to be honest, because just after that, there came the change that academies and free schools don't have to follow the national curriculum. No resources were put in, and it was, and actually, many people pulled resources out who'd been funding it when it wasn't on the curriculum. In the curriculum review, what they say is, improves attention to key areas of applied knowledge and skills, including digital and... Financial. Literacy, a greater focus on media literacy skills that help young people guard against misinformation. Good, good for scam campaigning for me.

• 4:12Martin Lewis?

  Greater attention to climate science and actually, just as an aside, a stronger focus on young people's oratory speaking skills, which I think is interesting, but let's me focus on the stuff that's mine. Because I went in and I met them a number of times. It's something I've been campaigning on. I've been working with the Young Money charity that's part of Young Enterprise for many years. We set up an all-party parliamentary group on this. You know, I've given evidence more times than I can count about financial education. So what is going to happen? Because it's a little bit confusing for some people because it's already on the curriculum. So first of all, on the secondary school curriculum, citizenship has financial literacy in and it is going to be strengthened. There is more that will need to be do and it needs to be stronger than it currently is on the curriculum.

• 4:56Martin Lewis?

  There's also financial numeracy in maths and what I've been championing, and we're not at this point yet, is schools need to have someone, and this is in the reviews recommendations, who coordinates across both. What you want is before, you know, while you're teaching, say about debt as an easy example in citizenship, that's when you need to be doing the debt mass in mass so that you're not doing seven months apart. So there's a disjoint between the two. That's going to be a little bit tricky for schools, but that's one of the things that we're looking at. The second point is for the first time it will be, financial literacy will be in the citizenship curriculum for primary schools. The big change though is that citizenship will be a compulsory part of the curriculum

• 5:41Martin Lewis?

  and all state schools, including free schools and academies, will have to teach it. Now, it's been on the curriculum, but the research shows less than one in three young people think they have had any form of financial education because it is just not taught. This makes it mandatory, it must be taught in schools. That's the big deal. Now, look, we need to be honest about this. First, the government has to fully enact this review. That is expected. But the detail will matter. Intention is nothing without proper implementation and teacher training and resources for schools and for enthusiasm. Yet, right now, because I've been doing this since 2010, I am settling for a big cheer that we have an intention to improve things.

• 6:25Martin Lewis?

  An intention that we live in one of the world's most competitive consumer economies, where firms spend billions on advertising, on marketing, on teaching their staff to sell, that we don't get any buyer's training. We send our children out into a world of scams and dodgy deals and debt, and we educate them into what we call debt when they go to university, but never educate them about debt. So just the fact there is an intention to change that lifted my mood, and I am very happy, and that's why I put my quote of support in the press release for the curriculum review.

• 6:56Speaker 02

  Okay, got it. I should say that somebody's pointed out that surely you were bitten by a money spider.

• 7:02Martin Lewis?

  Quite right. Yeah. Does that mean, instead of webs, I'll be able to sling coins? Be quite a good superhero, wouldn't it? If you've got enough velocity on them, a coin can be quite a dangerous object. You know, I could be fighting crime but throwing money at them. That doesn't work. We'll work on it. We'll workshop it later.

• 7:19Speaker 02

  We'll workshop it, exactly.

• 7:23Speaker 02

  So, the savings masterclass. Some basic rules on savings. Squirrel away as much as you can?

• 7:28Martin Lewis?

  No. I think there's three things I'd say before we get to the point of put everything you can in savings. Three caveats. First of all, if you have expensive debts, it's usually best to use any spare cash to clear those first. You know, a thousand pounds on a credit card at 25% interest costs you 250 quid over a year. A thousand pounds in a savings account at 4.5% interest gives you 45 quid a year. So if you paid off the debt with the savings, you'd be 205 pound a year better off. People often say to me, you know... I don't want to get rid of all my savings. I don't want to pay. Take a credit card. You've got two grand on your credit card. You've got two grand of savings. You pay the credit card off with the savings. You've got nothing on the credit card. People say to me, but what if I have an emergency? Well, you put it back on the credit card. At least in the meantime, you were saving money.

• 8:13Martin Lewis?

  You're no worse off than you were initially if you have to put it back on the credit card. But by not having any savings and paying off the credit card in the meantime, you're saving a lot. That's rule one. Rule number two, if your mortgage rate is the same or higher than you can earn in savings, it's usually worth looking at overpaying your mortgage because that's giving you an effective savings rate at your mortgage rate. I mean, check whether you can overpay penalty free. You normally want about, you can normally pay, overpay 10% a year of your mortgage value penalty free. And, you know, always keep a cash emergency fund, three to six months' worth of bills. Final thing, and I'm making a big point of this. If you are putting money away for more than five years,

• 8:54Martin Lewis?

  in most circumstances, you would be better to be investing, not saving. You know, putting it in a broad tracker fund, a global tracker, an S and P 500 or a FTSE 100 that tracks the market indices. In the normal run of play, if it's for over five years and you don't need the money, investing will outperform saving. We are too risk averse in this country. Too few people invest. You should be investing before saving. I tend not to talk investing because it's not my expertise, but I'm making a principle play now that every time I talk about savings, I will make that point. I talk about how to save because that's what I do. That does not mean I'm anti-investing. In fact, I think you'd be wrong if you have a decent proportion of spare assets to have it all just in deposit savings. It isn't the right thing for most people to do.

• 9:42Martin Lewis?

  There are two simple routes. Two simple routes to good interest. The first is the BOG Standard Easy Access Savings Account, where you can put your money in, you can take it out when you like. You get the best interest rate possible. If you do nothing else, put all the cash you don't imminently need in a top easy access savings account. Now, the top payers at the moment, two pay 4.5%. So that's what you want to be looking at. If you're earning less in easy access, get your money out of there. And put it into one of these. You've got Ulster Bank, which is part of NatWest, so it's a big name. Pays 4.5%, you need a minimum five grand. There's a 2.75% of that interest is a bonus for a year, so the rate will drop in a year. But for the next year, you should have a decent rate because all easy access accounts are variable. There's also Chase,

• 10:25Martin Lewis?

  part of JP Morgan for newbies, pays 4.5% minimum a pound. Again, includes a 2.25% bonus. If you just want a bog standard, simple, you don't have to be new, there's no minimum. Hodgbank, 4.21% minimum a pound, maximum £250,000, which is way more than most people will have to put in. And, you know, take your money out when you want. No other caveats to that particular one. The alternative is fixing. Right, you can fix, lock your money away, you can't access your money in a time, but your rate is guaranteed. The problem with easy access is it's variable. If the Bank of England drops interest rate, those rates will drop. With a fix, you lock your money away, that rate is absolutely locked in for one, two, three or four years. The problem is you can't take your money out, so you have to be able to lock it away.

• 11:10Martin Lewis?

  Unless you put it in a fixed rate cash ISA where the rates are slightly lower, but you have access to the money for an interest penalty. So you lose two months of interest, three months of interest to get the money out. They are your basic start points of where you begin to save. Top fixes at the moment, Monument, 4.47% for one year, L H V Bank, 4.46% for one year. M B and A, part of Lloyds, 4.22% if you want a big name. And the rates are about the same for two-year, three-year and five-year fixes too.

• 11:36Speaker 02

  Okay, and those, just worth pointing out, those are all protected up to 70,000.

• 11:40Martin Lewis?

  £85,000 per person, per financial institution. Yeah.

• 11:45Speaker 02

  Okay, so Mandy Wilson then. I still don't understand all the ISAs. I have 10K to long-term invest, but may need access at some point. What is the best option for growth?

• 11:56Martin Lewis?

  Okay. A cash ISA or a stocks and shares ISA are not products. It is not a choice between a fixed rate savings account and a cash ISA. A cash ISA is a tax wrapper. Shall I do my been doing it for 20 years cake analogy? All right. So imagine, I've done this many times before, but I think it works. Imagine I have two, two cakes in front of me. One is a chocolate cake for cash. One is a strawberry cake represents stocks and shares. They're cakes in front of me. The problem with those cakes normally is, once you're earning a certain amount of interest, we'll take the cash one, the chocolate one, the tax person can come along and take a bite out of it.

• 12:38Martin Lewis?

  But each year you get a £20,000 cash free or stocks and shares ISA wrapper. Think of a piece of cling film. I've got my £20,000 of cling film wrapper. I can choose to put it around my chocolate cake or my strawberry cake. I put it around my chocolate cake. Inside the cake is exactly the same thing as it always was. It has not changed. It has not materialized to something else. It's still just savings. The only difference now, ooh, taxman, taxwoman can't bite it because it's inside a protective tax wrapper. So that is all an ISA is. It is a way of saving or investing where you don't pay tax. You never pay tax and it stays tax free year after year.

• 13:18Martin Lewis?

  So the top easy access cash ISA right now is trading 212 at 4.53%. Again, includes a bonus that rates only for new customers. Now, that is actually slightly higher than the top easy access savings. So if you haven't used up your ISA and you weren't planning to this year for anything else, you may as well put it in trading 212. You're protected from tax, but more importantly, the rate's higher. So it's just a savings account you don't pay tax on. Let me hypnotize everybody. Look into my eyes. I know we're on the radio, but pretend you're looking into my eyes. Look into my eyes. Don't look around my eyes. A cash ISA is just a savings account you don't pay tax on. A cash ISA is just a savings account you don't pay tax on.

• 14:01Speaker 02

  Okay, the, I mean, I suppose her question is, a question is like, what's going on inside the wrapper? And she wants growth. Now, obviously, you're getting into sort of

• 14:10Martin Lewis?

  But if you want, well, if you want growth, you invest.

• 14:12Speaker 02

  Long term, she says. So what kind of thing should be looking at to invest this 10K long term?

• 14:18Martin Lewis?

  Look, if you're looking to invest money that you don't need access to for over five years, then you you want investment, not savings generally. I would hope you've got a cash emergency fund. I would always have a cash emergency fund first. I have to be very careful. This is regulated area where I can't give advice. But the standard thing that you would say is a tracker fund. That's one that tracks the stock market index, like the FTSE 100 index of shares in this country, like the S and P index in America, or there are global tracker funds. And that gives you a very broad basket of investments. So you're buying a fund that invests or or mimics the investment in hundreds of different stocks and shares, major stocks and shares. And if you've got a broad spread of investment that mitigates the risk, it lowers the risk. So if the markets grow, your money should

• 15:02Martin Lewis?

  grow. If the markets drop, your money should drop. And over the long term, the markets tend to outperform saving. So you'd want to do that. You would want to go and get yourself that. Do it through a platform. Don't do it direct. You do it direct. You tend to pay bigger charges. So a platform like AJ Bell or Hargreaves Lansdown or Trading 212. And you go and find, you go do a little bit of research on somewhere like The Fool or Triple I, and you should be able to find a fund that you're putting money away for the long term that does that business for you.

• 15:28Speaker 02

  Graham Strickland's got an ISA with Zopa?

• 15:32Martin Lewis?

  Zopa.

• 15:32Speaker 02

  Zopa at three and a half percent and a regular saver at seven and a half percent with the ISA being a tax free saver. Which account would I be best to withdraw from?

• 15:43Martin Lewis?

  Depends how much money you've got. I mean, if you've got 10 grand, you could withdraw. The ISA is the lower rate. So you would start by thinking, I want to withdraw from that one, because I'd keep my money in the place where it's earning the most amount of interest. The problem withdrawing from an ISA is if you wanted to use, you've already used up this year's ISA limit and you want to save more on top, you only get £20,000 a year. So if you've got five, 10 grand in the ISA, I'd take it out of the ISA, because you could always put it back in later, because you're allowed to put up into 20 grand a year and there's a new tax year in April. If you've filled up your ISA and you think you'll want to put more in ISA in futures, Well, then you're probably going to have to take it out of the regular saver provision that you're allowed to. The only, the other thing I would say, you've got a 3.5% rate on your cash ISA. Very important this, if you have money in a cash ISA,

• 16:26Martin Lewis?

  many people feel it's a done deal. I've put my money in my cash ISA, I can't touch it. Well, first of all, you can. There are easy access cash ISAs, but the rule is generally, there is a caveat, but the rule is generally, you can only put 20 grand in a cash ISA each year. So while you can withdraw, you can't automatically, there are some ISAs that allow it, put that money back in later within the tax year if you wanted to. So it's only about putting money in, you're allowed to put 20 grand in, in a year. But what you can do, totally separate to that, is you can transfer to another cash ISA provider to earn more interest. To do that, you apply for the new cash ISA, it doesn't affect what you can put it in the year doing a transfer. Within that new cash ISA provider's application form, it will have a transfer section, you give it details of your existing ISA, and it moves

• 17:10Martin Lewis?

  it across for you. And 3.5% is not that good for a cash ISA. There are cash ISAs out there, I've already mentioned one, paying 3, paying 4.5%. If you're going to keep it in a cash ISA, make sure it's in the best easy access cash ISA, or a fixed cash ISA that pays more. So go and do a little bit of research on what the best cash ISAs are, and then do a transfer.

• 17:29Speaker 02

  Okay, tax on interest. Greg's got a stocks and shares ISA that has over 85,000 pounds in it. So he's within the allowance because that's over a number of years, presumably.

• 17:39Martin Lewis?

  Yeah, so listen, there are people who have over a million pounds in stocks and shares ISAs, their investments, and well, they've maxed it out every year. You get 20 grand per tax year.

• 17:48Speaker 02

  Okay, his question is, what happens when I withdraw money from it? If, for example, I took out 10,000 pounds and transferred it into my current account, would this be considered income? And would I need to pay tax on it?

• 17:59Martin Lewis?

  No. No, it's a really interesting one. And I think some of this comes from, I often phrase how a cash ISA works. Once you put your money in a cash ISA, it remains tax-free year after year after year. So you could put in 20 grand this year, 20 grand next year, then you've got 40 grand plus whatever interest there is, or stocks and shares growth, then 20 grand the year after. And it stays tax-free as long as it's within an ISA. And I think that's probably where that confusion is coming from.

• 18:27Martin Lewis?

  It isn't that when you take money out of an ISA, it's suddenly that money becomes taxable. It does not count as income. It is your money. It is still savings if it's a cash ISA. It's still investments if it's an investment ISA. But if you take money out and that money you have taken out then earns interest or grows, then it would be subject to income tax or capital gains, but not the money itself. So let me, let me try and really make this practical. He takes £10,000 out and he puts it in a savings account that's not an ISA. The £10,000 is not taxable. You don't pay tax on savings. You pay tax on savings interest.

• 19:07Martin Lewis?

  So if that £10,000 then generated £500 interest, because it's not in an ISA, that £500 interest is taxable, but not the £10,000 capital that he took out. Does that make sense?

• 19:24Speaker 02

  It does. And just to be clear, you put £20,000, say, a stocks and shares ISA, and it grows, it grows by 25%. So it's, it's then worth £25,000. Because that, the, with the, the growth has taken you way above the 20,000 limit, that doesn't make it taxable.

• 19:43Martin Lewis?

  The limit is on how much you can put, how much you can put in an ISA in a tax year. It is not, transferring ISAs doesn't count. Investment growth doesn't count towards that limit. Interest doesn't count towards that limit. The limit is only on how much you deposit in a cash ISA or in a stocks and shares ISA.

• 20:07Speaker 02

  Okay. Maggie is interested in which banks offer great rates, but then also drop rates super quick a few weeks later. Particularly interested in the Moneybox ISA, which looks good, but worried that some reviews say they dropped their initial rates quite quickly once they've hooked a few new customers.

• 20:23Martin Lewis?

  I wouldn't single out Moneybox particularly. There are many, almost all savings providers who at Best Buys work this way. What they do is they launch a competitive rate. They include a bonus. Of interest for a year or so and then after a year or so that bonus drops and it's no longer competitive and they may in the meantime have launched another competitive rate for new customers which you then see in the best buy charts and you think oh my provider is still paying a good rate no because you only got a bonus so Moneybox is the second top paying cash ISA it pays 4.52% trading 212 is 4.53% I mean diddly squat difference it includes a one year 0.82% bonus so let's just talk about what

• 21:05Martin Lewis?

  that means in practice that means the underlying rate here just doing my maths is 3.7% so the underlying rate on Moneybox is 3.7% variable plus a bonus a fixed bonus of 0.82% for one year so for one year you currently get 4.52% but let's say the Bank of England dropped interest rates by a quarter of a percent that 3.8% variable may well drop by quarter of a cent in line with it so your interest rate would drop and the bonus is fixed now there are two ways to look at this you could look at it and say well I don't want that I know the bonus is going to drop I'm going to go for top easy access

• 21:49Martin Lewis?

  savings Hodge Bank 4.21% variable no bonus but it's still variable and variable rate easy access providers can change their rate based on two things one the Bank of England rate dropping and two based on their own competitive whims they can simply lower the rate because they think well we've got enough money in now we're going to lower the rate and some people will leave but we'll keep many people staying with us we don't want to pay as much that is the word variable that's what the variable means so I come from a school and it's my school I come from a school that says I like bonuses because bonuses at least give me a guarantee for a certain time I go back to that Ulster Bank

• 22:28Martin Lewis?

  top easy access payer 4.5% including a 2.75% fixed bonus for a year so I know the minimum I'm going to get for a year is 2.75% and everything else on top you know hopefully interest rates will stay up and will work well So my view is there are no good savings accounts in the long term barring the odd if you have an old NSNI index tracker type thing that would keep you up with the rate of inflation or something. It is, you have to be an active, aggressive, churning saver to keep on the best rates who's going to move. But with something like Ulster or Chase or Trading 212 or Moneybox, at least as a bonus, so you know, I'm going to have to move in a year, but at least I can diarise to move in a year.

• 23:13Martin Lewis?

  I'd still monitor it meantime, just in case to drop the rate because they could on the variable element. So the answer to your question is yes, they will do that, but they'll all do that and you just have to be aware of it. And don't worry, we have many, many more savings questions and answers to come. Shall we have a bit of tell us though?

• 23:31Speaker 02

  Let's do some of these tell us's about people who just love their work. It really gives me a list, I was going to say earlier, when I speak to people who just love their job, whatever the job, if you're happy, I just like hearing it. So Alastair from Redcar has been a locksmith for the last eight years. Best, excuse me, best job in the world, huge job satisfaction. It's just good to, it's just good to hear, isn't it?

• 23:54Martin Lewis?

  Yeah, there's so many good ones. I mean, see Honeybourne, I love my work. 38 years in the ambulance service and still doing it. 30 years as a paramedic, now emergency care assistant. I use every ounce of my brain power, very satisfying, quirky situations, great people everywhere, paid to be kind. I would definitely recommend it to younger people.

• 24:16Speaker 02

  I mean, Paul in Sherborne in Dorset, I'm a jobbing builder, handyman, working on period properties, year off 70, love every day of my work. You know, just, I wish you lived nearer me, Paul.

• 24:27Martin Lewis?

  Yeah, and the whole point is we want to know whether you'd recommend it to young people today and your type of job. Now, I like this one from Patrick. Thought, I think it is. Oh no, it's Patrick the Art, which is relevant to where it's going, as you'll understand in a moment. He says, Art, worked as a fine artist come dustman, college tutor, built my own design practice employing 22 people. Used my skill to create, photograph and write an online design magazine, reaching 100,000 daily readers of half a million pages. Started at 18, still not stopped now at 79. Sold the magazine when I had cancer, now paint and write about life and art exhibit. Been rich, been bankrupt, it's been an adventure

• 25:12Martin Lewis?

  as life should be. My recommendation is follow your heart's desire. Be adventurous, embrace failures as steps in learning to be successful. Live, love, laugh, it only happens once, I think, maybe.

• 25:25Speaker 02

  Very good.

• 25:26Martin Lewis?

  Thank you so much, Patrick the Art.

• 25:29Speaker 02

  Andy has been welding since 1989. I know he had a 10-year break to go off and do motorsport, as you do. I see the fruits of my labour in a fairly short time scale and get a sense of accomplishment knowing the entire thing was done by me. Could be an industrial building, artwork for Damien Hirst, a sewer pipe for Seven Trent, or a bridge for the Canal and River Trust. He did definitely recommend this way of life.

• 25:54Martin Lewis?

  And now we've got Stephen Hunt, who says, Yes, I love my job. I am paid to go to parties. Well, I sell tickets for club nights and create editorial content to promote the events, but essentially I get paid to be social, have fun and have an opinion on it. Best job in the world, doubt anything will convince me otherwise. What about your job, Adrian?

• 26:13Speaker 02

  I...

• 26:14Martin Lewis?

  Do you love it?

• 26:15Speaker 02

  Yes, I do. I do. I particularly love, I particularly love radio. I love it. Would I, it's a, I was just ruminating then, thinking, do I, I never know what to say when people say they want to get into media, because so many do. I think, on one hand, yes, follow your dreams, go for it. On the other hand, you and I both know it's a really difficult, it's a really difficult environment in media. So, you know, I'd... I don't know, I never know what to say. I honestly don't know what to say.

• 26:44Martin Lewis?

  You know, you go on Instagram and you read all these posts of, don't let anyone put you off. You follow your dreams. I did it. And that's only said by the people who succeeded. It's not said by the many people who didn't manage to live up to what, and you have to be realistic. And we both know that for people to have made, both of us have made careers in broadcasting on air, you know, and we worked in the silver period of television. We both started when you got, you know, four, five, six million viewers, not the one million viewers you now get on television. That we were lottery winners just to be here. There were so many other people who didn't manage that. And there will be many people who try to get to this position, won't necessarily succeed on it. Would I, I mean, would I, what I do is slightly perverse because I made up my own job. It didn't exist before I started it. So, and I built it around what I'm good at.

• 27:29Martin Lewis?

  And I do, I love and hate my job. I love my job because I love what I can do with it. I love the fact that I can get to help people and get policies to change and to educate. And, you know, I see myself in a way as a teacher. I hate it because it is incredibly stressful. I often don't sleep at nights. I worry about everything that I've said. You know, I'm, I'm always trying to be on top of what I do. I'm an absolute perfectionist and think that's the only way you can do what I can do. And I try and second guess myself all the time. And being as public and opinionated or advisory, not that I give technical advice as I am, carries a lot of stress with it. So I, I do love it and I wouldn't give it up. But I do also find it quite difficult too. And it isn't, it isn't for the faint hearted of which I probably am.

• 28:14Martin Lewis?

  Shall we do one more each? Let's do a nice, and I like this one because at first I thought it was, at first it was chatting me up. It's from Brian of Arabia. He goes, seven, three, seven, seven, four, seven, seven, five, seven, seven, six, seven, seven, seven, seven. And I just thought someone counting at me. Hello. But then he carries on to say, pilot, eighteen thousand plus hours, also military helicopter and flight instructor. Been flying professionally since nineteen eighty-eight. Have flown for Air Two Thousand, First Choice Emirates, Ryanair, and now Cargo UK Operator. Retiring soon. Can be very satisfying and at times challenging. Great career for motivated and focused young people. Although it's expensive change to be a pilot.

• 28:53Speaker 02

  Instead of reading one, I'm just going to quickly read a list of just some of the people, just some of the occupations. We've got a fine artist, com Dussman, who loves it. The airline pilot, as you said, a lecturer in maths for engineering at a university, a cardiac physiologist, a career in pharmaceutical manufacturing, a chef, forty years a doctor and it's still a privilege, says P T. Got somebody working for a, for a German, what's a, a German OEM? What's OEM stand?

• 29:23Martin Lewis?

  I don't know, I'd have to give.

• 29:24Speaker 02

  But in high precision metrology instruments, measuring down to nanomicrons.

• 29:30Martin Lewis?

  Edu.

• 29:30Speaker 02

  Loves it.

• 29:30Martin Lewis?

  Engineering manufacturer, I'm guessing.

• 29:32Speaker 02

  Must be, must be, yeah.

• 29:33Martin Lewis?

  So I've got, well, hey, we've got a ballet teacher, we've got a catsitter. They all love what they do. And you know, work's a lot easier if you love what you do. Right.

• 29:42Speaker 02

  That, can I just tell you, that's one of my favourite ever stories from my, from my, from my kids in primary school, where they were going around the class being asked what they wanted to do for a living. And they were saying like actress, footballer, singer, et cetera. And one lad, whose name was Frank, sorry Frank, I've been banging on about this for years, he's a grown man now, but he put his hand up and said, catsitter. They all turned, had to look, they all turned around and looked at him. I love it, every time I see it, any joy.

• 30:15Martin Lewis?

  Now I should get back to doing my job, which is answering questions on savings?

• 30:18Speaker 02

  Yes, I take that on board.

• 30:20Martin Lewis?

  Smooth, see that?

• 30:21Speaker 02

  Yes, smooth. The, I mean, someone just said, regarding tax interest from savings, the example where you said £500 would be taxable, but we all get £1,000 interest free before being subject to tax. He wasn't listening carefully enough.

• 30:34Martin Lewis?

  I said taxable. I didn't say taxed. And, and, and that, that's the language I use. So, interest in a cash ISA is not taxable. It is never subject to tax. Interest outside a cash ISA is taxable. But you're right, basic rate taxpayers are able to earn £1,000 of interest a year in the personal savings allowance without paying tax on it. Higher rate taxpayers can earn £500 of interest a year from. Any form of interest, a cash ISA interest doesn't count towards it because it's not taxable. So it's taxable interest without paying tax on it. Top rate taxpayers don't get that. So when I say taxable, that I mean it is subject to taxation, not that it would actually be taxed. For example, we can all, if you didn't have any other form of work or income,

• 31:20Martin Lewis?

  then you can earn up to eighteen thousand five hundred and seventy pounds a year from interest tax free. If your only income is from interest, that interest is taxable, it's just not taxed. So I was using my language accurately, but I perhaps should have explained it better.

• 31:36Speaker 02

  Okay, Carl Fletcher wants to know, are some of these companies safe to put your money in? And he says like Moneybox, but Moneybox is getting it in the neck today.

• 31:43Martin Lewis?

  Well, look, Moneybox is, because it's advertising a lot, I think. Moneybox has one and a half million customers, I believe. This is how I will answer any question that anybody asks me, is it safe? If it is UK regulated savings, so that's money in a deposit account, that's a cash ISA, which tends to be banks, building society, credit unions, do check they're UK regulated. Moneybox is, as is every account that I'm mentioning today. Then you are protected up to eighty five thousand pounds per person, per financial institution, not per account, per financial institution, in the unlikely event it were to go bust. So as long as you are putting less than eighty five thousand pounds in, is my money safe in Moneybox? Yes, because in the unlikely event it were to go bust,

• 32:28Martin Lewis?

  then it would be protected by the Financial Services Compensation Scheme. In reality, that probably wouldn't happen. What we saw in the two thousand and seven crash, where we saw big institutions go down, is the government organised that that pot of savings, the people who had savings in it were ported to a new institution. So you didn't actually get the compensation. You were just suddenly a customer of a different bank with the same amount of money in there. And that happened above eighty five thousand pounds too. But if you want the underlying sort of structural guarantee is the eighty five thousand pounds.

• 32:58Speaker 02

  Okay, on regular savings.

• 33:00Martin Lewis?

  Yes.

• 33:00Speaker 02

  Uh, my current six and a half percent regular saver with Nationwide matures mid-November, says Deepak. I'm looking for a new regular saver to put away around £200 a month. What's the highest paying account at the moment?

• 33:11Martin Lewis?

  Okay, so regular savings accounts are where you put away a relatively small amount of money each month in return for a higher interest rate. So you can earn up to 7% in regular savings.

• 33:20Speaker 02

  And if you miss a payment?

• 33:22Martin Lewis?

  Depends on the terms. Some allow you to miss payments, some allow you to withdraw, some are fixed rate, some are variable rate. So it it it depends on the particular provider. Now, you're with Nationwide, I presume you're an existing Nationwide customer, you could open a new one there at six and a half percent once your existing one ends. And most of the best regular savings accounts are linked to current accounts, so you have to have their current account. So if you happen to have a current account with Co-op, First Direct or Zopa, they pay more than Nationwide, so I'd go for one of those. If you don't, the best paying open to all regular savings, i.e. not linked to a current account, is the Progressive Building Society that pays 7% variable for a year on up to £300 a

• 34:05Martin Lewis?

  month being put in it. Now, that's pretty good. It's also worth noting, let's say you could put away £500 a year, well, you could, you can put £200 in your Nationwide, your linked Nationwide regular saver, and you could put another £300 in a Progressive Building Society one. There's nothing stopping you having more than one regular savings account with different providers. So if your savings gen it comes from spare money each month as opposed to a lump sum, then putting it in regular savers, I mean, it's the best possible interest you can get. But people do have an issue with it sometimes because they always get less interest than they think.

• 34:39Speaker 02

  Adam says, I did the Halifax £250 a month you suggested last year. Did you suggest it? Maybe?

• 34:45Martin Lewis?

  Possibly. It was part of my top regular savers, yeah.

• 34:47Speaker 02

  After 12 months, uh, so £3,000 paid in, I got £90 interest. Absolutely not worth it.

• 34:53Martin Lewis?

  Do you hear what I just said? But some people come pay, you don't get enough. This is what people don't philosophically understand about regular savers. The interest rate is high, but you only get paid on the money that's in there. So let's just think that Halifax one, I think, was paying 6%. And in fact, just doing the maths, £90 interest is about 6%. People get to the end of the year and they've got 3,000 or 3,600, it's 250 pounds a month you could put in. So they've got 3,000 pounds in there and they think 3,000 pounds at 6%, 6% of 3,000, I should have 180 pounds worth of interest. But you did not have 3,600 pounds in for a year. You had nothing in at the start, then you had 250 quid in for a month, then you had 500 quid in for a month, then you had 750 in for a month, then you had 1,000 in for a month.

• 35:37Martin Lewis?

  I won't keep doing this. And so over the year, your average balance, if it was naught at the start and you're putting the maximum in at 3,000 at the end, is 1,500 quid. So it's a way of thinking, I have an average balance of 1,500 quid in there, 6% interest on 1,500 quid is the 90 pounds. Now, so people, he's going, it's not worth it. But ultimately, on the money you have in there, there is no standard way, we're going to talk about special schemes later, to earn more. It pays more interest than anywhere else. So if you're paying, this is why it is for regular saving, money being put in each month, you cannot earn more than a regular savings account. If it's money in a lump sum, what you have to think about, let's say you've got 3,000 pounds in

• 36:21Martin Lewis?

  the savings account and then you move it 250 quid each month into the regular saver. Now, at the end, you're going, I've only got 90 quid, it should be 180 quid. But you're forgetting, you've got it in a lump sum savings account, that's earning interest too. So as you're porting it into the regular saver, this is for those who move from lump sums, you're still earning interest while it's sitting in the lump sum account, you would need to add up both together. And if your normal savings account is paying 4% and the regular saver is paying 7%, well, you're probably going to get somewhere around 5.5% interest combined across the two, which is better than anything else you could get.

• 36:54Speaker 02

  A good question on tax from Henry. I don't know whether I need to tell HMRC about all the various pots, or if the banks will all magically declare it for me. This is about tax on interest. They use a variety of regular savers and a main savings account. I've noticed some banks provide a certificate of interest on their apps and imply they'll be declaring it to HMRC at the end of the year. But I joined Zopa recently and I believe they implied they wouldn't declare this interest. Will I need to declare all of this?

• 37:25Martin Lewis?

  I think there's a confusion. Okay. This is how you pay tax on savings if you need to. If you're sent a self-assessment tax form, i.e. a tax return in common parlance, to do each year, you have to do it via that. That is what the tax certificates are for. So you get your tax certificates to know what your official interest was, you add it all up, you put it in your tax return. If you are not sent a self-assessment tax return, which most people are PAYE and lower earners are not sent one, and your interest is under £10,000 a year, that is a lot of interest. I mean, just think about it, you know, you're talking, what would you need to generate £10,000 a year on 5% savings? £100,000 at 5% would be

• 38:08Martin Lewis?

  £5,000. So you're talking 200 grand interest, 200 grand in savings or more. So if your interest is under 10 grand, you don't need to do anything. The tax office will simply change your tax code because savings providers are required to notify of your taxes, and it will change the tax code, that is the instruction to your employer, of how much money you pay in tax, so that you pay the tax that way. If you get more than £10,000 interest, then you have to do a tax return. There are some slight quirks on this that occasionally fix rates providers provide the wrong information and therefore you're taxed in the wrong tax year. For most people, that isn't a problem. I've talked about it on podcasts in the past. But basically, in your situation, you don't need to do anything. I can't believe Zopa doesn't report. It is a requirement that

• 38:51Martin Lewis?

  they do report. They probably just don't offer a tax certificate, which is for people doing self-assessment. But I will double check that. Well, I say I will double check. Rosie, are you listening? Could you double check that for me? It's my researcher Rosie. Now, by the magic of podcast, the wonderful Rosie did check for me. Zopa do let you download the certificate of interest. It's generated at the beginning of each new tax year and can be downloaded anytime from the app, and it does, of course, report details to HMRC.

• 39:18Speaker 02

  Jill Lyons says, "The trouble with interest in savings accounts, unless they are ISAs, as the government alters your tax code." I fell for that one, took out a higher interest savings account, then got clubbed for tax on the interest as it took me over the £1,000 interest threshold.

• 39:31Martin Lewis?

  Well, yes, but you do pay tax. I mean, savings interest is taxable. You are allowed to earn up to £1,000 a year as a basic rate taxpayer. Any interest above that would be taxed at 20%. So if you went £100 above that, you would be paid £20 tax, and you would get £80. The way to avoid that is by using a cash ISA, which is on top of your personal savings allowance. And therefore, if the money were in a cash ISA, or the excess above the £1,000, then it would not be taxable. But yes, you're absolutely right. That's exactly what happens because you have to pay tax on savings interest.

• 40:02Speaker 02

  Michael says perhaps a reminder of the starting rate for savings for those earning an income of £12,570 or less. So they don't assume an ISA is the first option?

• 40:12Martin Lewis?

  Well, cash ISA, top easy access cash ISA currently pays more than top easy access and just normal savings. So it is for easy access at least the first option, but not for fixes because the rates are lower, just because it pays more. Okay, starting rate of savings is complicated. This is a special extra allowance for lower earners only.

• 40:32Martin Lewis?

  If you earn under £12,570 income from work, then you can earn £5,000 of interest from savings tax free. For every pound of income from work, you go above the £12,570 personal allowance, you lose a pound of tax free interest. So let me give you an example because that will help. If your income from work was £13,570, which is £1,000 above the £12,570, you lose a thousand pounds of the interest you can earn tax free under the starting savings

• 41:15Martin Lewis?

  allowance. So if you earn £13,570 from work, you could earn up to £4,000 of interest tax free from savings on top of it. You also get your personal savings allowance, which is another thousand pounds of tax free interest on top. So basically, that's why I said earlier, you can earn up to £18,570 tax free if all of your income is from savings. But once you earn over £18,570 from earned income, you do not get a starting savings allowance. But for those, it's basically primarily a sop to older people who are living off their savings interest, who don't have earned income. I mean, it does work for other people on low incomes, but that's generally the category of people who have large amounts of savings and small amounts of earnings.

• 42:02Martin Lewis?

  We're still not finished on savings. Still to come, your questions on lifetime ISAs, help to save, premium bonds and more. But now, I could do with a break. So let's challenge someone else. Adrian, it's mastermind time.

• 42:21Martin Lewis?

  Welcome to My Money Mastermind, where I put Adrian under the cosh and test his financial knowledge. Now, he got the last one right, which means you have snuck above random chance, Adrian. In this three-option multiple-choice quiz, you have got 13 right and 24 wrong, so you could now get two more wrong before you hit random chance again. I should ko-kko, well done, my friend. Thank you. You're beating a drop of snot on a piece of paper to pick the answers. Right. Adrian, you've been invited to be the keynote speaker at Wolverhampton Wanderers Football Club's annual charity gala. Unlikely.

• 43:02Martin Lewis?

  Raising money for sick children, vulnerable elderly people, and small, ill puppies. Cunningly, they know as a West Brom fan, this puts you in an awkward position. After all, it's wolves, ugh, but it's cute, pickle, sick puppies, ah, and they sent pictures of the puppies, ooh. Now, the invite also includes a prominent note on how to donate. So you, seeing a solution here, hastily write back, saying, "I'm so sorry, I'm so sorry I'm not available, but I will make a generous donation as a way out." Good solution, well done, mate. The form, of course, includes gift aid notification. You're a UK taxpayer, so what I want to know

• 43:46Martin Lewis?

  is, if a higher 40% rate taxpayer makes a donation to charity and correctly fills in the gift aid form, what happens? A, the charity can claim all the 40% on their donation; B, the charity can claim 20% on their donation, and that's it; C, the charity can claim 20% on their donation, and the taxpayer can claim back 20% too. So this is a higher 40% rate taxpayer making a gift aid donation. Can the charity claim all the 40%? Can the charity only claim 20%? Or can the charity claim 20% and the taxpayer claim the other 20%?

• 44:34Martin Lewis?

  Do you understand?

• 44:34Speaker 02

  Yeah, I do. And if it's C, then being a very generous man who often gives to charities and fills out the gift aid, then then I I must be able to claim money. So I don't think it's C. I can't remember whether they can claim all the higher tax or the differing higher tax. And I reckon I reckon they can claim all the tax, all the 40%. I think it's A.

• 45:07Martin Lewis?

  So.

• 45:07Speaker 02

  Because when they ask you, will you they before they ask you to sign with your gift aid thingy, they always say, are you a UK taxpayer? They don't say, are you a UK higher rate taxpayer, which might be indicative. Anyway, I'm going to go for A.

• 45:24Martin Lewis?

  Adrian, the charity cannot claim all the 40% donation. Uh-uh, please. You just gave away the answer, but you didn't think of it. What do they ask you?

• 45:32Speaker 02

  Are you a UK taxpayer?

• 45:34Martin Lewis?

  They don't ask whether you're a higher rate taxpayer because they can only claim back 20%. So all they need to know is, are you a UK taxpayer, of which the of you pay 20%?

• 45:44Speaker 02

  They get it the wrong way around. I thought.

• 45:46Martin Lewis?

  But interestingly, you can claim the extra 20% back. So when you are a higher rate taxpayer, they get 20%. And if you've made a gift aid donation, you can claim the other amount of tax back through your self assessment tax return. So you should have been giving your gift aid donations to whoever does your tax form for you if you don't do it yourself, and you should be claiming back that amount. Now, as I strongly support charities, arguably, therefore, if you are happy to donate £100 of your money as a higher rate taxpayer, donate £133, then the charity gets £166. You can reclaim £33, and it only costs you £100. Only if you are earning that much above the 40% limit, though. So

• 46:30Martin Lewis?

  you can actually give even more as a higher rate taxpayer if you want to give it all to the charity, because you can reclaim some tax on it. So just on that gift aid thing, I wanted to explain in a little more detail. I did it very quickly when I was in the live show. The key is, in order to reclaim the tax at the higher rate, you have to have paid that much tax at the higher rate. So just so I can set that out for you. Let's say for easy numbers, you've donated £100 and therefore there's £20 being reclaimed from, by the charity and you can reclaim £20 of tax yourself. If you were only £10 over the higher rate tax threshold, you couldn't reclaim £20. You could only reclaim £10 at the higher rate because you can only reclaim at the higher rate if you've paid that amount of tax.

• 47:14Martin Lewis?

  Shouldn't be an issue for most people, but occasionally people do get in touch with me and ask me about that one. So just being, being really tight on that. But generally, it does mean if you're a higher rate taxpayer, you can actually get away with giving more than you thought you would to charity because you can then reclaim some of it back. I mean, of course, the other ways you could give what you wanted and you could have it in your coffers. But hey, I'm doing my best for the third sector.

• 47:37Martin Lewis?

  Now it is after the live show time and I'm with podcast producer Matt and we have been swamped with your savings questions. So let's get straight back into them. What have you got for me, Matt?

• 47:47Speaker 03

  We'll go straight into one from Muriel. She's asking, is a ISA the best option for a youngster wanting to save for their own home?

• 47:55Martin Lewis?

  It should be. That's what it's designed for. The lifetime ISA is a savings product. It's a form of ISA, so it's a tax-free savings product where you can open it from age 18 up to age 40, the day before your 40th birthday, in fact. And you can put up to £4,000 a year in it and then the state will add a bonus 25% on top of what you save for it to be used towards your first property as long as you've never owned a home before. Alternatively, you can keep the money in there until you're age 60 and then you can take it out, including the bonus as well. So if you put the maximum £4,000 a year in, that's £1,000 a year of free cash from the state given to you on top. So under that, it's clearly an absolute no brainer.

• 48:38Martin Lewis?

  There are though some baboons, some big butts, Matt.

• 48:43Martin Lewis?

  Unfortunately, in this case, I cannot lie, we do not like a big but. The first is that you only get the bonus as a first time buyer. If you've had the LISA open for a year, so I would strongly suggest every young person who may one day want to own a home. Goes and put a pound in a LISA account, even if you're not going to use it, what it does is it starts that clock ticking. And then you will have had it open a year and what you could then, if you suddenly decide you're going to want to use it later, you could put £4,000 in, get a thousand pound bonus towards. Your deposit on your first property. But the two biggest problems with the lifetime ISA work together. The first is you can only use it on a property under £450,000, that's the purchase price of the property. And it should be its actual market value.

• 49:25Martin Lewis?

  Now, this is not an issue for most of the country, but is in the southeast of England, where some first time buyer properties are above that amount. And the real problem with the lifetime ISA is if you take the money out for any other purpose. Then buying a qualifying property or you leave it till age 60. You have to pay a penalty. Now, it's an effective penalty of 6.25%. What actually happens, remember you get the 25% bonus on the money you've put in. And then you have a 25% penalty if you withdraw money for not buying a house or not until age 60. 25% on and 25% off actually works out, not that you get the same, but you actually get 6.25% less than you started. So if you put in £10,000 in a lifetime ISA and you take it out for that not reason, you're going to get.

• 50:09Martin Lewis?

  Around £9,375, you're going to have to pay the state a fine of over 600 quid. So a lifetime ISA is best for those who know they will definitely be buying a property and it will definitely be under £450,000. If not, then you're taking a risk that if you wanted the money to, for another purpose, or even to buy a property over £450,000. That you would be paying a fine to the state to get your money out.

• 50:38Speaker 03

  So say if you've put a little bit of money in and then you think, actually, I don't want to buy a house, just leave it?

• 50:45Martin Lewis?

  Your choice is leave it until age 60 or take it out and pay a penalty.

• 50:51Speaker 03

  Right.

• 50:52Martin Lewis?

  It's as simple as that and that's the decision that you've got to make. Now, the problem is, of course, and why I've really been campaigning, is for those people who've saved because they want to buy a property, but they've been in an area where property prices have gone up, so the property they're going to buy is now over £450,000. They are using a lifetime ISA for exactly what they should use it for, but they're still having to pay a penalty to take their money out for a deposit for their first time property. I think that's wrong. I have campaigned on it, written to chancellors, given evidence to Parliament on it, done the whole thing. My view is, if you're buying a property, then you shouldn't have to pay the 6.25% penalty. You might not get the 25% bonus, but you should get back what you put in.

• 51:36Martin Lewis?

  I haven't yet succeeded on that one, though, I'm afraid.

• 51:39Speaker 03

  Understood. Following on with the LISA theme, Mikey has asked, "I have an old LISA with £8 left in it after we used it to help buy our first house a few years ago. Now thinking about trying to start putting money away in an ISA. Should I just use the same LISA or is there a better option?"

• 51:56Martin Lewis?

  Well, obviously, the benefit of putting money in a LISA is you get the 25% bonus, but I mean, nobody who's got a lifetime ISA is 60 yet because it's only been around since 2017 and the oldest you can open it is age 39. So the oldest you can be with a lifetime ISA is 46 currently, around that age. If you put money in the lifetime ISA, that is fine if you are willing to wait until you're age 60. If it is money you want to utilise for something else, or you might want to spend before you're age 60, don't use a lifetime ISA.

• 52:29Speaker 03

  All right, Cath, I've been told Halifax doesn't offer ISAs. I thought every bank offered this account.

• 52:35Martin Lewis?

  The opposite, in fact. Most major lenders, most major high street banks do not offer lifetime ISAs. In fact, I think there's only an offshoot of NatWest that does. None of the main brands do. This is something I mentioned I gave evidence to Parliament, and one of the, my other problems with the lifetime ISA is, because of this fact that you can take the money out when you're 60 is the other way to get the bonus, it is seen as an alternative form of retirement planning. But the problem is, for the vast majority of people, because we have auto-enrollment, which is where when you are an employee, your employer has to near-match your contributions, and you get tax benefits on putting money in a pension because it comes from your pre-tax income. So normally for every £100 you earn,

• 53:18Martin Lewis?

  you only take home £80 after tax, but you could alternatively put a whole £100 in your pension. Because of those reasons, for the vast majority of people, then putting money into your pension is better than using a lifetime ISA. And the main banks are so scared of being done for misselling because people wrongly use lifetime ISAs for retirement when they shouldn't be, they don't offer them. I mean, and that is a huge design flaw, which when I gave evidence to the LISA committee, I said, you know, this is just completely ridiculous. We need to make this work. Because the fact that you can't get it from major providers is nonsense. But no, you can't. Halifax don't offer it. We've mentioned Moneybox already, they are actually the top paying lifetime ISA. And again, lifetime

• 54:02Martin Lewis?

  ISAs, like all the rest, you're protected up to £85,000 per person, per financial institution, with your money in a lifetime ISA. Now, Matt has more questions to ask me, but I just wanted to interrupt to talk about a subject no one has asked me about that's actually really important. And it is the unbeatable savings product out there if you are eligible. It's called Help to Save, and you get a 50% boost on what you put in there.

• 54:30Martin Lewis?

  However, there are strict qualifying criteria. To open it, you must be working, it doesn't matter what you're earning, even a pound counts, and on universal credit. So in that case, you can open a Help to Save account on the gov.uk website. Once it's open, you can continue to contribute to it even if you're no longer eligible for universal credit. And here's how it works. You can put in up to £50 a month for two years. And after two years, you get a 50% bonus on the maximum amount you have in, even if you've withdrawn the money. So let me try and illustrate that for you. You put in £50, you put in £50, you put in £50, you put in £50, you put in £50, you put in £50, you put in £50.

• 55:14Martin Lewis?

  You now have £400 in Help to Save. You have an emergency, you need to use that money. You take the £400 out, you can't afford to contribute for the rest of the two years. At the end of the two years, you have nothing in your account. But as the maximum amount that you had in was £400, you still get 50% of that. You get a bonus of £200. Of course, if you absolutely max it out, then you've got £1,200 in after two years, so you're getting a £600 bonus. And then the scheme restarts after that for another two years, where you get the bonus on the maximum amount that you have in over and above what you had in before.

• 55:59Martin Lewis?

  So that means, over the four years, if you were able to max it out and put the £50 in a month without taking anything out, you would get a £1,200 bonus on the £2,400 you've managed to save in there. The idea of Help to Save is to encourage those who tend to be less financially resilient to be putting money into savings. And with a 50% bonus, it is absolutely unbeatable, there's nothing better. So if you're on universal credit and you work, go and open yourself a Help to Save. Whatever you can afford to put in will help. Sharon? And no, my name's Martin.

• 56:38Martin Lewis?

  Carry on.

• 56:39Speaker 03

  Sharon, can... Oh, no, I'm laughing now.

• 56:43Martin Lewis?

  You can keep going, Matt. We're all with you.

• 56:45Speaker 03

  Can parents pay into a ISA for their kids, Sharon?

• 56:49Martin Lewis?

  Well, it's very important to understand that a lifetime ISA is an individual's product. So your child will have to open it once they're 18. I mean, if it's just a matter of can you put money in there once you've got the details of the lifetime ISA? I don't see that, why that is an issue at all. You can't open it for them, absolutely. You can give them the money. You can give money, people always think there's issues with... You can give people money, as long as it's not payment for something. You can give people as much money as you like. The only issue could potentially be inheritance tax. And so as long as you live for more than seven years after you've given your money, it's not part of your estate anyway, it's not an issue in any way. Give them, give them the money, if you want to give them the money, absolutely. Bye, Jiminy.

• 57:28Speaker 03

  Fair enough. Final one, premium bonds. Jay is asking, what are your thoughts on premium bonds? And on average, how do their prizes compare with interest earned on ISAs?

• 57:37Martin Lewis?

  Okay, sit back, everybody. We're going in for a ride. This is gonna take you back to schoolroom mathematics. This is how we understand a premium bonds. It's a lovely bit of complexity that I'm going to enjoy. You may not, but I will. So, right, are you ready? Matt, I'm gonna test you. Do you know the difference between the median average and the mean average?

• 58:04Speaker 03

  Median is the middle.

• 58:07Martin Lewis?

  Yep.

• 58:08Speaker 03

  The mean is you add them all up and divide it by how many you've got.

• 58:13Martin Lewis?

  Correct, and there's also the mode which is the most, but that's not relevant here. So, the premium bond prize fund rate is currently 3.6%. It is, of course, tax-free, money in premium bonds, you can put up to £50,000 in there. The prize fund rate dictates how much of the total amount in premium bonds is paid out in prizes. So you would think, ah, if I put £100 in premium bonds, I'm going to get back an average 3.6%, so £3.60 a year. And on a mean average, you would be right. But that would also be completely nonsense because the smallest win you can get on premium bonds is £25.

• 58:55Martin Lewis?

  So for everybody who has £100 in there, the vast majority will win nothing and a few people will win £25. So when you're looking at what you're likely to win in premium bonds, we actually don't want to use the mean average, we want to use the median average, the I'm in the middle. If we lined up everybody with £100 in premium bonds, how much would they win? Well, the answer on £100 is nothing. In fact, the answer on £1,000, the person who is 50% of the way from highest winnings to lowest winnings, would still win nothing. So it's very important to understand that because of the distribution of prizes on

• 59:36Martin Lewis?

  premium bonds, if you have a small amount in with typical luck, and I define typical luck as the median average, you would win nothing. As you start to put more in though, from about £5,000 to £6,000, then you start to get a rate of interest that looks and resembles something like the mean interest. So, once you have about £5,000 in, your median winnings are about 2.8% to 2.9%, even though the price fund is 3.6%. And in fact, even if you have the maximum £50,000 in, your median winnings, i.e. what someone with typical luck would win, is still always below the mean average.

• 1:00:22Martin Lewis?

  Because for everybody who has to win a million pounds, quite a few people have to win nothing. So, premium bonds, first of all, the top easy access savings are currently paying 4.5%. The top fixes are paying 4.45%. With typical luck, even with the maximum in a premium bond, you're only going to win around 3.4%, 3.5%. So with typical luck, they certainly do not come close to the top easy access normal savings accounts. Where they can be good though, is for those people who are paying tax. Now you'll remember, we've talked about, you can fill up your cash ISA, you have the £1,000 personal savings allowance, or £500 if you're a higher rate taxpayer.

• 1:01:06Martin Lewis?

  If you've used up your personal savings allowance, if you've filled your cash ISAs, then, because premium bonds are tax free, if you're going to put a significant amount in them, let's say over £10,000, £20,000, at that point, the returns, because they're tax free, will likely outstrip the top easy access or normal savings accounts. So in my book, premium bonds are best for those wealthier people, higher taxpayers, who have filled up all their other savings elsewhere and want to use premium bonds. Which is ironic, because they tend to be given as a gift by grandparents to kids, who put £100 in it, and with £100 in a premium bonds,

• 1:01:49Martin Lewis?

  most people, on average, will win nothing. Of course, there is always the chance that your luck will be better than average. But remember, there is always the chance your luck will be worse than average too.

• 1:02:00Speaker 03

  So does that mean I just have good luck, because I've won on my premium bonds?

• 1:02:05Martin Lewis?

  Well, I don't know if you're prepared to say on air how much you have in them, Matt.

• 1:02:08Speaker 03

  I would say not a, I can tell you if you want, it's not a lot, it's £200.

• 1:02:13Martin Lewis?

  £200, then you've been lucky. You've had better, how long have you had them in there?

• 1:02:16Speaker 03

  Uh, 13 months.

• 1:02:19Martin Lewis?

  13 months, yeah, you have had substantially over typical luck to do that. I mean, right in the top end of probability. Now, the interesting thing about premium bonds is I get people who say to me, no, but I win every month. They're great. And I ask how much they've got in, and they say they've got 50 grand in.

• 1:02:34Speaker 03

  Oh yeah.

• 1:02:34Martin Lewis?

  And I'm like, well, hold on, we would expect you to win around 3% to 3.5%. You've got 50 grand in, so you're talking you're going to be winning £1,500-ish a year, which over 12 months means you're going to be winning, you know, over £100 a month. And they go, yeah, it's great. And I'm like, yeah, but if you put the same amount in an easy access savings account, you would be winning way more than that. And you'd know, and you'd have it absolutely guaranteed. So people, bizarre, there's the perversity of the premium bonds, that normally when we do finance, we talk about a risk premium, i.e. the... You know, they should pay you more because you're taking a risk. And on premium bonds, you're taking a risk of whether you'll win more or less.

• 1:03:19Martin Lewis?

  But premium bonds, people somehow are willing to do the opposite. They're willing to take less for the risk because they'll go, well, there's always a chance I'll win a lot. And that's the genius psychology of the win on premium bonds. But when you calculate it by clinical financial mathematics as opposed to the emotion, I'm not the biggest fan for most people.

• 1:03:39Speaker 03

  It's the thrill, isn't it?

• 1:03:40Martin Lewis?

  Yeah, exactly.

• 1:03:41Speaker 03

  Winning and, oh, well, I might win, I might win. And yeah.

• 1:03:45Martin Lewis?

  So if you want that, why not, you know, go and put your money in a top, top easy access savings account. And then, then with one pound of the interest you earn each month by a lottery ticket, get the thrill that way and you'll still end up with more than you would on average in a premium bond.

• 1:03:59Martin Lewis?

  Well, that was a mammoth one. That's it for this week. If you've enjoyed it, please tell your friends you've been listening to the Martin Lewis podcast. And why not subscribe? Then your pockets will be pleased with you. We tend to put out a new episode every Thursday and now too, on a Monday, in the form of our Question Time podcast, where you can ask me absolutely anything and everything within reason. And if you haven't enjoyed it, when it's your fault for listening this far, all I have to say for you is.

• 1:04:41Speaker 04

  Martin Lewis is the founder of MoneySavingExpert.com. But of course, other consumer and price comparison websites are available. You can get in touch with Martin's podcast production team by emailing [email protected]. The offers and rates mentioned in the podcast are correct at the time of recording. However, if you are listening on demand, it's worth double checking as details can date. Remember to subscribe on BBC Sounds and leave us a review however you listen.

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