Savings Q&A – boost what you get | Is Black Friday a dud? | Acts of Financial Kindness | Energy Price Cap news

Hello and welcome to the cunningly named The Martin Lewis Podcast. I do wonder what that's all going to be about.

Now, some of this podcast comes from my Radio 5 live show with Adrian Charles, but don't worry, there's also lots of special bits just for you lucky, lucky podcast listeners. In today's pod, interest rates are dropping and saving rates sadly following suit, so I'm leading on a savings Q&A about how to make every penny work as hard as it can, including easy access fixed and regular savings, cash ices, lifetime ices, help to save and more.

As Black Friday approaches, the big question is it really a big deal or a big dud? Should you be doing your shopping now? We've had a beautiful response to this week's tellers. Eurycan moving stories of unrequited, unrequited acts of financial kindness. For all those who've lost faith in their fellow human beings, it's worth a listen.

Today's mastermind is all about energy bills, and I'll also talk you through the price cap announcement due out tomorrow. I say tomorrow, that's from where I sit. You may be listening to this later, in which case it's already happened, which makes me slightly nervous in case I've got it wrong. I mean, I don't know what's gonna happen, but I think I've got a good idea. And to finish, there was a huge response on last week's slot on our premium bonds worth it. And as this pods about savings, we've repeated it at the end, just in case you missed it. Play the theme tune.

I love that music because I just love that music and I also love it because it means Martin Lewis is with us what we got on the agenda today Martin

Well, we'll be talking a little bit about Black Friday, but the main subject, it's a savings Q&A. Savings rates are dropping. The Bank of England base rate has dropped. Savings rates are dropping. So our savings fix rates, even though fixed rates, mortgages are going up. And the tellers today, it's actually quite beautiful. It is. The tellers today is, have you ever experienced an unrequested, unrequited act of financial kindness? When someone you don't know has helped you out without being asked, or maybe you help them out.

And we've got some really lovely ones. I'll just tell you, tell you on the back of that. It's not really a tell us, but it happened to me about eight minutes ago as I was rushing just coming into the studio. So I was rushing and I have my hold on when I'm walking because it was cold and also cause often when I'm busy, it means less people stop me. I'm sorry if that sounds terrible. So I had my hold on and I was walking and I was in my own world thinking about what I was going to say on the show.

And I heard footsteps, someone running up behind me, and like a normal human being, you're always a little nervous when you're here running, so I look behind. And it was a woman I'm not going to describe because I want to keep it, it should be anonymous. And she came up to me and she grabbed my hand, and she said, you are Martin Lewis, aren't you? I said yes. And she said, and then I saw she was, she had sort of eyes rimmed with tears. And she said, we were in dire straights, and we spotted the thing where you talk about

the wrong person getting national insurance credits and my husband was getting them for our child we realized when i should have been cuz i wasn't working and he was working so we got it transferred over and now my pension's been boosted by three and a half thousand pounds and i've got pension credit and i listened to everything that you say now and it all came out in the sort of scatter gun approach with the eyes rim with tears and i found it incredibly moving actually if i'm honest.

Because, you know, you have some days when this is tough and I sometimes think, why do I do it? And then I remembered why. So I'm sorry, I've just got a little, it was only about 10 minutes ago and it was all quite lovely. Listen, I've got to tell you, 10 people a week stopped me in the street and they say to me, how brilliant you are, Martin Lewis. I feel many more compliments about you than I do about myself.

It was a nice moment and I think our tellers is going to, we're going to go on that vibe today, we're going to talk about savings, but we're also going to give you a little bit of a moment where you go. You know what, humanity isn't quite as crappy as everybody thinks it is. Let's start with Black Friday then, Martin. Is it a thing of a genuine bargains to be had and it's always worth reminding people that

It's essentially meaningless in this country, isn't it? Because it comes from America, where it's the Friday in question is the day after Thanksgiving.

It is indeed. And that's the history of Black Friday. And it used to be years ago when I first started doing this job that we had discounts right the way through October, November, and December. And then the Black Friday advent came and they consented into this Black Friday weekend. And we're now seeing that the accordion, I'm doing mixed metaphors here, the accordion spreading wide again. And we're starting to see that this weekend I call Grey Friday because many of the Black Friday deals have already started. But we've already had lots of deals and discounts in the run up to Christmas coming through.

So, yes, look, the honest answer is yes, absolutely Black Friday is a thing. And we've done some studies, my team and I on this last year, because we wanted to try and check it out. And on the basket of 50 items, we found that 70% of them, the cheapest part, time to buy before Christmas, and I'll come to that in a moment, the cheapest part to buy before Christmas was at Black Friday, in 70% of cases.

In 12% of cases the pre-Christmas sales were cheaper than Black Friday and in 18% of cases they were roughly the same. So if you know what you want to buy and you have to buy it before Christmas,

Black Friday is real, always do your research, always compare your prices, always check you've got it right. And Black Friday is the time to buy if you're buying before Christmas based on a sample of 50 goods. So listen, it wasn't always going to be because there's no hard and fast rule, but in most cases it will be. Of course, remember my Black Friday rule.

If there is something that you wanted to buy and it's 50% off and you buy it, you've saved 50%. If there was something that you didn't want to buy and you're buying it only because it's 50% off, you've lost 100%. So you have to make sure you're not being tempted. You're not having your spending impulses tweaked.

by the discounts and the fiery psychological promotion type it's in big it's in red it's exciting it's all moving forward actually we should always have a list and we should always be conscious about what we want to buy but yes black friday israel and it tends to be the cheapest pre christmas prices of course the cheapest time to buy for christmas

is in January. Now January sales are different to the Black Friday sales. Black Friday sales tend to be one of items or some do coded type discounts across everything in store, whereas January is about stock reduction. So on the items they want to get rid of, the discounts are bigger if you can find something in January, it's cheaper. So there are two ways to utilize January. There's the one people will go, yeah, I wish I was that organized about, which is in January, you buy for the following Christmas. Or then there's the one that will raise eyebrows and people will say, I couldn't do it.

But I may as well say it anyway, if you're going to buy a high value item for this Christmas, maybe for your family and friends, and you know it's going to be cheaper in January because these things are your big electronics or whatever, you're buying a new TV. What you could just do is print out a very nice IOU. Let's say you're buying a smart telly because the family needs a new smart telly and that's a big Christmas present for the family. You print out an IOU when it comes to Christmas,

you hand over the IOU and say we're going to buy this in January and then you buy it in January and that delay enables you to save rather than being held hostage by the retail festival element of Christmas, which is what it's become, a festival for retailers to try and encourage us to spend more and spend at that period and you could then divert your spending into January. I would love to know if there's anyone out there who's done it.

And there'll be many people who've already done, who did their Christmas shopping in January, letters know that. But equally, has anyone been brave enough to give the IOU for an object they're going to buy in the January sales for Christmas?

Just one more question on this. You might not be possible to answer it, but on Black Friday, what categories of goods tend to lend themselves to good Black Friday deals? You know, what kind of price points we're talking, you know, electrical goods, TVs and stuff, clothes, trainers, is there any general... Well, I do have my teleprogram people and they call it the famous festive forecasting, which is where I predict all the deals that are going to be coming in the run up. Now, look,

Apple usually and this is a prediction, it's not confirmed yet. Apple very rarely discounts new items. So one thing Apple does on Black Friday is in previous years, it's given vouchers of a value between 160 and 250 quid on bigger purchases. So if you're going to buy Apple, it's a good time to buy Apple items.

We've got eBay's likely to do 20% off outlets. Now, outlets are already cheap, so if you know a store you want to buy from and it's got an outlet and you're looking for clothes, the extra 20% off works there. It also does 40%, usually 40% off Dyson, Refurbs, which is pretty popular. What else would you look at? Amazon.

resale is now called used to be Amazon warehouse which is returned items to Amazon they sell cheaper currently has 10% off everything likely to be a 20 or 30% of everything gap has a 20% of everything if you spend over 100 quid these rules predictions of what will come I do not necessarily have this confirmed that's the whole point of my festive forecaster.

So I'm always a fan of those that give you cross-core discounts on everything. Disney's going to do a 30% off on a very substantive amount of items in its Disney online sale on Black Friday. That one is confirmed, so you get a 30% off there. So it's really about the way I would suggest people do it is know what you want and be ready to jump when the price is cheaper. Many stores, your John Lewis's, your a.o.com do one-off discounts where they drip feed big reductions on specific items they want you to buy.

that isn't necessarily the best way because you may not want that particular item. So it's about knowing what you want, doing your research on your day, being clever, La Redoot tends to have an up to 50% off sale. I'll be doing some research on what the actual sale values were. We had data taking the data last Christmas. I think on average, the up to 50% there was around a 30% discount. The advantage of La Redoot is it has lots of brands. So if the brand you're specifically buying from doesn't have a discount, go to La Redoot.

The problem is I can't generalise Adrian. I understand why you're asking the question. It's always about specific. It's always about is what you want going to be discounted. Most people are saying, no, what I want is never discounted. But it's about being ready to pronounce, knowing when the discounts will come out and where. And there is that the information of what I think is going to happen to all the different discounts and deals in various different stores is available if people want to go and look for it somewhere that I can't quite say where it is.

I'm about to go into the savings Q and A with Adrian. But before we do that, I just wanted to give you an overview because I think it helps you understand all the various issues that we're going to go through. My big message for anyone with savings right now is you need to check what interest rates you are paying. We are in an environment where UK base rates are dropping and that means savings rates are dropping too. And the fact that you had a good account

A year ago doesn't mean it is good anymore. Many savings account rates are variable and they can drop them without you knowing. Now my absolute top benchmark is you want to be earning around 5% because that's what you can get in the top easy access accounts.

easy access accounts are those simple accounts where you can put money in when you want and take money out when you want and you can put lump sums in but the rates are variable and as the top of those are paying around five percent that's what we should be aiming for that's what we're looking at that's what we want our savings to be paying but there are many other categories of savings too

The next I would look at would be a fixed rate savings. The difference between fixed and easy access is well with a fixed rate you get an absolute guarantee of what the rate will be for a set term but in order to do that you need to lock money away. Now the top fixed rates at the moment are paying around 4.7%

so you can lock money away for a year and get a guaranteed rate of 4.7%, which means if the Bank of England cuts interest rates doesn't matter to you, you know what you're going to earn, and you have the advantage of certainty in a fix.

I'll move on to another slightly more niche version where you can earn a bit more. These are regular savings accounts. Now here, the top payer is 7% interest. Wow, sounds amazing. But you can only put small amounts in. Most of the best deals here are linked to your existing bank account.

So, if you've got a first direct account, you can earn 7% fixed for a year and up to £300 a month. If you've got a co-op bank account, it's got a 7% account too. Nationwide has a 6.5% regular saver, Lloyd's a 6.25% regular saver, all for different amounts, all for putting in those small amounts month after month after month.

Also, if you're with NatWest, Skipton, TSB, Yorkshire Building Society, Bank of Scotland, Halifax or HSBC, all of them have linked regular savers if you've got their accounts open, which pay you over 5%. If you don't have any of those accounts or you want to put more away each month, then you can do so in the Principality Building Society and the Halifax, which have regular savers open to all, so not linked to their bank accounts, that anyone could put money in.

We'll be talking about cache ISAs in detail during the podcast, because I record this bit afterwards, so I know what I'm going to say. So I'm not going to go into that in too much now. And similar on lifetime ISAs, which are for first time buyers.

Very important note though that I do want to talk about is help to save. If you're on universal credit or tax credits, you may qualify for an unbeatable 50% bonus in a help to save account. Now currently you have to be earning over around 700 pounds a month from next April. You'll just have to be earning one pound or a more a month in order to qualify for help to save. And once you qualify and you start it, it doesn't matter if you no longer qualify, you can then use it. Here's how help to save works.

You can put in up to 50 pounds a month. And you can do that in the initial stage for up to two years. At the end of the two years, you get a 50% bonus based on the most that you had in there. So let's imagine this scenario. You put in 50 pounds a month for a year. 12 times 50 is 600 pounds. You've got 600 quid in there. Great, you're starting to save. This is about building some financial resilience.

Then you have a problem. You've got a smashed window that you need to fix. You need the 600 quid. You take the 600 quid out and you can no longer afford to put any more money in there. So for the remainder of that year, you have nothing in the account. At the end of the two years, with help to save, it says, what's the most you had in there? The answer 600 quid. What's 50% of 600 quid? 300 quid? That's how much you get. So even though you took the money out, because you maxed at 600 quid, you get a 50% bonus on that.

totally unbeatable. And the final thing we need to talk about that I did on last week's podcast is Premium Bonds. So I'm going to add what I talked about last week to the very end of this podcast if you would like to listen to who Premium Bonds are good for and who they're not. Well, that's enough of me. Let's get over to the program where it's Adrian and more of me. Sorry.

Okay, savings then. Where would you like to, if you've got some opening statements, you'd like to make or should be a statement? Shall I do that? I refer the honourable jokes. Okay, so let's just do what's going on with savings. Savings rates have peaked. They peaked in around the start of October 2024. Easy access rates have come down and the reason for that is simple. The rate of easy access savings like variable mortgages,

moves with the Bank of England base rate. We have just had a quarter of a percent Bank of England base rate cut. So we have or the second one of course. So we have seen easy access saving rates drop a touch and some of them are in the process of coming down right now. Fixed rate savings.

they move with the city's long-term prediction of interest rates. Now what's happened at the moment that's quite interesting is fixed rates are currently less than easy access rates because the prediction over the next year or so is interest rates will come down further. So the fixed rates have already dropped, factoring that in, the easy access rates haven't. So if you want to just put your money in somewhere on a variable rate, and variable rate of course means the rate can move,

then you will get a better rate with easy access at the moment if you want certainty you're going to earn less with a fixed rate. What's frustrating me right now is since the last base rate cut by the Bank of England, mortgage fixed rate deals have gone up. They've got more expensive.

But savings fixed rate deals have continued to decline. Now, that shouldn't happen. The two should move in sync because both are based on city swap rates, those long-term interest rate predictions, which says to me, looking at least at the very cheapest mortgages available and the best paying savings available, there's some margin grabbing going on at the moment, which is something I'd like to see the regulator look at because the gap between

fixed rate mortgages and fixed rate savings is growing. The good news though for savers, if you want my summary to finish, is I've got a little graph in front of me now. And if we go back to the middle of 2022, a couple of years ago, the best savings you could get them were around 3%, but inflation was 10%, which meant in reality, putting your money in the bank in that year, your savings weren't savings,

they were losing because you put your money in a savings account and it was not growing as quickly as prices were rising. So when you take the money out, even with the added interest, your actual purchasing power of that money had diminished in the short run. Currently,

We have inflation at around 2% and the top savings rate at around 5%. So in real terms, your savings are actually growing. Putting money into savings means your purchasing power is increasing and you will be able to buy more with the money when you take it out than you did when you put it in. So this is a better time for savers than it has been for quite a long while, but I'm not that confident it's going to stay, which is why it's worth looking at them.

And now I think let's just throw it open to whatever anybody else wants to ask me. Sean's hanging on the line calling from the Hebrides. Sean, what's your question? Thanks for coming on. So my question was, how often should we be ditching and switching our easy access savers? Because it seems to me, no sooner have you opened a new account, then there's another account that's already beating that one.

and I mean my easy access saving is currently 4.5% and that includes a 1% boost so I guess I'll have to do something about it soon but I'm just wondering is that okay or

Should I be switching that now? I mean, it's annoying. The regulator should do something about this, isn't it? You know, give somebody a good deal, then it goes, and then you just, they got to change it again, Martin. Well, that is variable savings. I mean, that's the definition. That's why the word variable is there, because the rate can vary. And so my solution to that is you have to be an active, aggressive saver, constantly hunting for the best deals. Of course, not aggressive with people, but aggressive with your own action. So I'm going to throw this back to you.

You're asking me how often I should switch. Really the answer is how often are you willing to switch and how big a deal is it for you? What's your comfort zone if you're within 10%, not 10% interest, but 10% of the top easy access rate are you happy or do you want to be closer? I think 4.5% is not too bad at the moment. Yeah.

It's just I know that in the past I think I've had a council open for less than two weeks before I've decided to switch again so well that just seems a bit excessive.

Look, let's be straight. The first thing to say is you can switch as often as you like with savings. It doesn't go in your credit file, so there's no negative impact for switching repeatedly apart from the administration hassle of doing it. And if you have a decent amount in savings than that administration hassle annoys you, then these days we have savings platforms like Hargreaves Lansdowne and Raisin and others.

where once you open an account with them, they have a selection of savings products in there, a panel of savings. They're normally pretty good, although they're never quite the top best buys on the market. And then you can move from one to another, basically, at a click. They'll have 10 different savings providers, and instead of having to fill out the forms and go through all the money laundering checks, which is what those forms are all about when you open one, you can simply move the money within

those platforms panel of savings institutions and it's much easier and the protection is still with the bank that you're putting the money in, not with the platform. So you still have the same safety protection. So for bigger savers who move regularly and who are willing to understand, they're going to drop 0.2 percentage points of interest normally compared to the very best on the market, then that makes it easier. Now, my answer would be

If I go through the best buys at the moment, you're at 4.5%, that's decent. As you quite rightly say, it's got a bonus and I would always urge people to look at the bonuses. The bonuses are temporary rate heights where they're effectively declaring in advance.

After a certain period, we are going to drop your interest rate. So you need to die a rise a few days before that's happening because you're going to want to and you use my catchphrase. I quite like you doing so. Thank you, sir. Ditch and switch at that point. But I'm going to run through the top easy access for you at the moment because I think that's indicative.

The very top easy access variable pair at the moment is Santander edges saver. So you've got to have a Santander edge bank account, so that's very limited. It pays 6% of whopping rate, but only on up to £4,000. The rest of the accounts I mentioned you can put more in. The top easy access accounts at the moment

Ironically, our cash isers, not normal savings. Now, the key to a cash iser is normally it's about for those people who pay tax, because cash iser rates are normally lower than normal savings rates. But right now, perversely, the top paying cash isers, because there's been a price war amongst that, are the top paying easy access savings. You've got trading two, one, two at 5.17%, unlimited withdrawals, and money box also at 5.17%, with three penalty-free withdrawals available a year.

I suspect those rates will go down because they haven't moved since the Bank of England cut rates by a quarter of a percentage point recently. But they're head and shoulders above anything else. Of course, as they're cash ices, that means it's a maximum £20,000 in them per tax year of new money. The top normal savings count, 4.85% from atom bank.

But if you withdraw money in a month, you lose interest in that month. Top big name leads building society, top branch at 4.55%, co-op bank 4.59%. So, unless you're an absolute butter clenching saver who wants to have absolutely the top interest at every moment. Are you butter clenching Sean? Can I just check?

Not at the minute, no. Not at the minute, okay, it's good. I would suggest from what Sean has said, he's pursed, he's but pursed in a little bit, but not fully clenched. Would you say that's fair, Sean? Yeah, you want it to be right, but you're not gripping on tightly to the savings rates that are out there.

So, agents, enjoy their analogy, aren't you? So, I would say, if you're absolute, then you want to be on around 5% right now. If you're, what I would say is if you're earning less than 4% in your easy access savings, then unless you've got loads and loads, so you need to spread it across lots of different accounts, keep your £85,000 saving, safety protection, then 4% isn't enough. But if you're in the 4.44546,

You're right up there. You could do a bit better, but it's up to you whether it's worth it. It depends on the size of the amount of money that you've got and how much interest that would generate. But anything less than four, if you're earning less than four in your savings and they're not locked in because it's a past fixed rate, then I would say you want to be earning more than that now in easy access.

Can I ask you a general question? It's interesting we talk about how aggressive you are, and as a saver, how regularly you're switching. So if you're an appropriately aggressive saver with... Mid-clench. Mid-clench. Roughly, how many times do you suppose, Martin, you'd be switching a year?

I had the problem with that question. So I'm going to answer it. But I first of all need to say that the first thing we need to understand is lots of people have money in one savings account. There's no need. Savings accounts have different purposes. Easy access means you can take your money out where you want. Fixed means that you get a guaranteed rate. Regular savings means you put money in each month. You know, and there's other big cash isers for tax free. So actually, for those who have a decent whack of savings and

and there's a lot of money out in savings. Gah, have a guess. How much money do you think UK people have in savings? What do you reckon? What per person or overall? Let's do the big one. Scared of magnitude. Sean, go on. You'd be better at this than me. What do you think? I've not got a clue. I'm afraid. Okay. Billions or trillions? Trillions. Billions.

It's 1.5 trillion, 1,500 billion, that is 1.5 million million. It is a lot of money. It's more than public spending, that is. Everyone took their savings out and saved it and sent it to the government. That would be public spending on for a year. Oh, and modernity, yeah. Easily. It's an enormous amount of money. There's a lot of money in savings. There's over 100 billion in premium bonds alone.

When people do have money, and whereas this split, I talk about it many times, the split economy, lots of people have nothing, lots of people have a lot. And in the pandemic alone, 150 billion pounds of extra savings was built up. And you understand why people who kept in their jobs working from home left their expenditure built up savings at that time. So look, if you've got a lot of savings, then you probably do want four or five accounts because they have different purposes for what you want them to be. And therefore, in your in that position, you're going to be moving a lot.

But if you're saying to me, someone's got one easy access account. Well, my rule is if it's easy access, it's variable. If it's variable, I would suggest every couple of months you monitor it. What your own comfort level of how far you are from the best buyers up to you. But with current interest rates, you know, if it's less than 4%, I would be moving it. And if you're really, really pushing, if it's less than 4.5% and you got under 20 grand, I would be moving it. So for most people, I think this equates to,

one saw twice a year, unless we're in a period of base rate change, which we are right now, which makes it trickier, because interest rates are moving, so I do it. One saw twice a year, but the key is monitoring it. The key is you do not put your money in easy access savings, whether a cash iser or normal savings, and then think it's a done deal, that was a good rate, it'll be a good rate for yours. That's nonsense, it won't be absolutely, at the very worst, do it annually.

OK, all right. Thanks for that. OK, Sean, you can you can completely on clench now and and relax. Thank you. Enjoy your lunch tonight. Sean, the holidays. Just a quick note, savings rates change all the time, sometimes multiple times during the day. I'm giving you the rates that were live as I recorded. They may have changed already.

So please do double check first. There's lots of great information out there available online of the top savings rates in all different categories. We've got some ISA's questions. Can you transfer a, we call them Lisa, to another provider like you can an ISA. My Skipton Lisa is going down again to 2.8% in December. If I can transfer, what is the best paying Lisa rate on the market currently from Scott?

Top lyser, I would call it a lyser. I believe it's with money box at the moment. I'd have to double check the rate. I think it's about four and a half percent, but I do need to double check that. Yes, you can absolutely transfer a lifetime lyser, like you can transfer any lyser. Many people think when they put money in an lyser, which is a tax-free savings account, it is a done deal. It is not. All you have to do to transfer an lyser.

Is you open up a new ISO, a few don't allow transfers, but that's a product issue rather than an individual account issue rather than about ISIS themselves. You open up a new ISO, even if you're not putting money within it on the application form, it will ask you, do you want to transfer money?

And then within that, you fill in the details of your old ISA and the new ISA provider moves the money across for you. You do not withdraw the money because then you lose the ISA status and it would count as new money that you're putting in which you don't want to. So yes, you can absolutely transfer a lifetime ISA. Peter says, should I put all my funds into a fixed-way ISA or I'll stick with a flexi-ISA or half and half?

A fixed rate iser gives you a guaranteed rate. With interest rates likely to drop at the moment, there is some safety in that that it means that you know what you're going to get and if interest rates were to drop substantially, you've at least locked into a decent rate for some of your money. But you can't access it as easily in a fixed rate iser. Now, unlike normal fixed rate savings, which lock your money away,

By law, you have to be allowed to take your money out of any ISA with the exception of a junior ISA. You have to be allowed to take your money out of any ISA, which means they will all let you take your money out of a fixed rate ISA, but you'll pay an interest rate penalty, normally half a year's worth of interest for doing so.

But that actually is a decent safety net. It means if you think you want to lock the money away and won't need it, but there is a slight chance you will need it, then at least it gives you the option that you have got the ability to get your money out if you want, which you don't have with normal fixed rates. A normal cash iser is easy access. So the rate can change, but the advantage is if you want to get your money out of it, you can get it out nice and easily. So as for which is best for you, it's a question of how much you want certainty.

and how much you want to lock money away. But I should caution, while at the moment, easy access cash isers pay more than normal savings, for most people, normal fixed rate accounts pay more than fixed rate cash isers, which is why we need to talk about whether an iser is nicer or nicer is not nicer, which we can do later on.

And we were talking about witch isos and lysas, but we're going back a step now and should we or shouldn't we have an isa? Is an isa?

So whether an ISA is right for you depends on two main factors. One, do you pay tax on savings interest? And two, what is the rate of the ISA? So we're going to do this from the premise as it normally is that cash ISA rates normally pay less.

than the equivalent normal savings rates of the same version. So easy access to rates normally pay less than easy access savings. Fixed cash, I said rates normally pay less than fixed normal savings. As I mentioned earlier, currently perversely, that's not the case. So even regardless of the tax data, she want your money where the interest is higher. So you would put it in the cash, I said, if it's easy access savings, not with fixed. So who pays tax on savings?

Well, if you are a basic 20% rate taxpayer, which most people are, that's the biggest category out there, then you are allowed to earn 1,000 pounds of interest per tax year from all savings in total before you pay tax on it.

So at the current top interest rates of 5%, that would mean if you've got less than 20 grand saved, you will not be paying tax on your savings interest, because the tax is on savings interest. If you're a higher rate taxpayer, a 40% rate taxpayer, you are allowed to earn 500 pounds a year of interest from any savings tax-free. So at the top 5% rate, that would be 10,000 pounds or more in savings would start to generate you interest that was taxable.

If you're lucky enough to be a top rate 45% rate tax per rating over 125 grand a year, you don't get any personal savings allowance. So all your savings is taxed. And now I'm going to go down to this because, of course, remember, we're all generally allowed to earn £12,570 a year.

from any source, including interest tax-free. So if you're a low earner, you can earn up to £12,570 a year and you won't pay tax on it anyway. But for savings specifically, there's also the thing called the starting rate of savings, which effectively means if your income is less than £18,570, you have a much greater amount that you can earn in savings interest tax-free. I'm not going to explain it in detail now.

But if you earn under £18,570 and you have a lot of savings so you earn decent interest from it, you need to go and do some reading about the starting rate of savings. So having done all that...

If you're someone who's going to pay tax on savings interest, so let's say a basic rate tax pair with over around 20,000 pounds in savings, that's when ISA has come into their own. And ISA is just a tax-free savings account, a cash ISA, just a tax-free savings account. That's all it is. It's not special, it's not clever. If it's easy access, you can take your money out whenever you want. If it's fixed, it'll be fixed just like a normal account. The way I always describe it, I'll do it quickly. It's the analogy I've been using since I first started doing this job back in the year 2000, is I think

of a nicer as a wrapper. So imagine Adrian, I've got a huge big chocolate cake in front of me, really, really tasty, lots of icing, lots of cake. Chocolate begins with the sea, just like cash, it's cash savings, right? So I've got this big chocolate cake in front of me. There's a slice of this savings. Now normally, what happens, got this slice in my hand now, is in normal savings, at a certain amount, once a slice gets big enough, well, someone from the tax office can come along and,

Take a bite. That's what they can do of your chocolate cake or your cash savings.

Now, each year, you're given a wrapper. Think of a piece of cling film now. We've got a piece of cling film, 20,000 pounds worth of cling film. I take the cling film. I take my slice of cake. I put my slice of cake inside the cling film. Nothing has changed. The cake is still cake. It's exactly what it always was. It isn't any different. It hasn't changed the ingredients. It hasn't changed the way it works. It's still a slice of cake. The only difference is now it's inside the ISA wrapper. The tax officer comes along and...

Break his teeth on the cling film, just can't get through. Can't bite it. And that's what an iser is. It is a wrapper that you can put around savings or investments that protects them from paying tax. And that is all it is. So once you're within that, people say, should I get a cash iser?

Well, the question is, what type of cash I said you want? Do you want a normal, an easy access cash ice or a fixed rate cash ice? So cash ice has come into their own for people who will pay tax on savings. What's important to understand is once you put money in a cash ice, you can put 20 grand a year in, it's then tax free year after year after year. So you could put

If you're lucky enough to have £20,000 in this tax year, then on the 6th of April next year, you can put another £20,000 in. That would give you £40,000 in total analysis. The 6th of April of the year after you put another £20,000 in, that would give you £60,000 plus interest in cash isers. And you start to understand why there are some isome millionaires out there.

People who filled up that ISA allowance every year since it started and with the interest on top, they now have over a million pounds protected from tax inside the ISA wrapper. So those with a certain amount of money who are gonna pay tax on their savings, getting money in an ISA each year becomes incredibly important. But if you're a smaller saver with less than say 20 grand as a basic rate tax payer, less than say 10 grand as a higher rate tax payer, then ISA smyser. It's not really important to you. Focus on the interest rate.

We've got a caller, his name's James. What's your question, James? Thanks for coming on. Hi, thanks for having me on. My eldest is about to turn 18 and gain access to his child trust fund that we set up with the help of the government. He's got no desire to go to university, so he won't need it for tuition fees. I just wondered what the best thing to do with that money would be.

A couple of quick notes in there. If you were going to university it'd be the maintenance loan just to say for other people who are, I'd be more worried about them, the tuition fees and just to say to everybody there's over 600,000 children aged over 18 and over. The state put in £250 into their child trust fund if you're born between 2002 and 2011. There are certain dates within that.

that you've got money from the state. Over 600,000 children are unaware that they have a child trust fund. It can be over two grand in there for some people. Go on to gov.uk to try and locate your child's trust fund. If the child is under 16, the parent has to do it for them. If they're over 16, they can do it for themselves, but the parent can still do it for a child up to the age of 18. Go on to gov.uk to track down your child trust fund. You've got yours. Is it okay if I ask how much is in your sons?

It's about $30,000. Oh, wow, you've done really well. Well done for you. You've got a decent whiter. So look, the first thing I'd suggest, I presume at some point your someone want to buy a house. Yeah. So then I would be putting money in a lifetime ISA. The caveat, a lifetime ISA is a product you can put up to £4,000 a year in that you get a bonus from the state of 25% on top of the amount of money that you've put in up to £4,000. If you put £4,000 in,

You've now got £5,000 and that can be used for one of two purposes. Either as a first-time buyer buying a property that costs under £450 grand or until you're aged 60 for retirement. I'm not such a fan for retirement. Most people are better off with an employee-based pension. The key question then is, I don't know where in the country that you live. Is it likely your sum would be buying a property under £450,000 when he gets to a first property? I know he's only 18, so it's hard to answer.

Yeah, I'd have thought so, it'd be less than that. Okay. Well, in that case, a lifetime ISA looks good. The reason for my caution is if you withdraw money from a lifetime ISA for any other purpose than as a first-time buyer or once your age 60, there's effectively a 6.25% penalty. And that applies even if you are buying your first property.

If it costs over £450,000, something I've been campaigning for the last few years to get the government to change, it's totally iniquitous the state is finding people for finding people for using money that they're supposed to save as a first-time buyer for when they buy a first-time property just because house prices have gone up.

A couple of choices for you here. You could just go and put a quid in a lifetime, I saw, or I should be more accurate. He has to put the money in. He says money, has to put money in. And because you can't use a lifetime ISA unless you've had it open for a year as a first-time buyer. So putting a quid in just starts the clock ticking. Everybody aged 18 and above, because you can have a lifetime ISA if you're aged 18 to 39. Everyone aged 18 to above should have at least a quid in a lifetime ISA, because that way you'll be able to use it quicker.

But I would think a good idea would be able to put four grand of that in there. As for the rest of it, well, I should caveat, I only talk about savings. If you're investing over a long period and it's money for the long term, then investing can grow quicker than savings. You can also lose money on it. It's not my expertise, so I don't talk about it. Other than that,

Well, with 30 grand, I presume he's going to go to work. He would want to be using a cash iser. You've got the ones I mentioned earlier, trading two, one, two, and money box at 5.17%. He could also be putting some money away in a fix to get a guaranteed rate and spreading it across all those different avenues, which I think would work quite well. Are you thinking anything specifically for him that I've not mentioned? No, no. It was just about the lifetime iser and then what to do with the rest. That's really helpful.

And as I said before, what the top rate lifetime ICER is, I should now tell you it's 4.8% with money box, as I thought. There's also a temper that's got one at 4.75% just below. So those are the top pick lifetime ICERs. But absolutely, lifetime ICERs are great, apart from that 450,000-pound threshold. We're saying too, because people worry about this.

If you are a first-time buyer buying your first-ever property, you can use a lifetime ISA, even if your partner owns a property. It's an individual product. Equally, if you are buying jointly with someone and you're both first-time buyers, you can have a lifetime ISA each.

Shall we have a look at what people have told us? There's some great ones. Can I start with my favourite, Nicholas? Shall we tell them what the teller is first? Oh, yes. That's an excellent bit of radiogrammer there. If you're listening at home, you want to get into the business. Listen to what Martin just didn't follow him, not me. Go on, Martin.

So this week's tellers, have you ever experienced an unrequested, unrequited act of financial kindness? When something you don't know has helped you out without being asked, well maybe you helped them out. We put it on social media, we've been swamped with replies that warm the cockles of your heart if I'm honest. For all those people who are a bit sour about the nature of humanity, it's worth going on social media and just have a read about all these different wonderful acts of kindness that there have been out there.

This one from Nicholas warmed my cockles, but also intrigued my cockles. I don't know whether you can intrigue a cockle, but he was pickpocketed in Brussels, lost his phone and train tickets. He says, you're a star, I used to get my details up, but then I was stuck in London. Some German girl I got chatting to on the train saw the situation I was in and paid for my tickets back to my home in the West Midlands.

And then it ends. We want to know what happens next. You want a romance, don't you? Oh, something. And now she's my wife. Yes, exactly. It's not true, but let's say it. Yes, exactly. I've got one from Ali. I'm doing Facebook. You're doing X. Yeah. In my early 20s, I was on disability benefits and had a baby. Things weren't easy financially at all. One day, I got a letter in the post with what I think was 100 pound cash and a note saying something like,

I don't know how you're managing. I've just had a tax rebate and wanted to share it with you. I never found out who it was. I'm still touched 30 years later. Isn't that beautiful? Someone says the first Christmas after my kids lost their dad six years ago. I woke up to find out that someone in the US has chosen to send us $1,000 after friends had nominated us. We had nothing then. My daughter and I now spread that amount over the year to help others who were struggling.

How lovely. Linda, I had just lost my mum and had £5 in my purse and £2 in my bank account. I popped into Tesco for milk and bread and met a sister of a friend I hadn't seen in years. We were chatting and she said, why the small milk? I said, it's been a long month. We finished talking and she was a couple of people ahead in the queue. She came back, walked past me and folded up a £20 note into my hand quietly and just came character on walking.

I'll never forget the act of kindness. I was able to pay for some electricity on the electric key and didn't have to worry about my heating and lights until I got paid again. She'll never know what she did for me that day. Well maybe she's listening, maybe she's listening and she does know and she's got a little bit of a warmth and a smile too.

That's lovely. And Deb says one very skint Christmas in the 80s. I got a second job in a restaurant to make ends meet. I only worked for a few weeks there. I was touched when the owner gave me a bag of chocolate coins on Christmas Eve. I cried though when I found out they were real £1.50. Foil wrapped. What a beautiful idea.

Gorgeous. All of these. Joanne. I was once buying my daughter a coat. I'm very diligent when my budgeting was telling her to pick a cheaper coat that was in the budget and a strained a shove 20 quid in my hands. It was a lovely gesture, but it completely ruined my keeping to a budget lesson.

I like this one from Porsche. Porsche, I did this once. He said, once paid for somebody's bus fare, but for entirely selfish reasons. They didn't have the cash, their cards weren't working, and I was going to be late for work. It doesn't quite count, but I'll, since I've been guilty, if that's the right word of that, I'll let it go. Should we do you know what?

I'm just going to do one more because let's do one of someone who did it, Victoria. I was sat in my vet's waiting room to be seen, sat in my vet's waiting room waiting to be seen. A gentleman was trying to pay for his puppy's initial vaccinations, but the vet had changed policy. So unless he paid for both up front, it would work out more expensive.

He asked if he could do it in two parts a few days after as his benefits would be paid later. They said no. I felt so sorry that he was trying to do the right thing and vaccinate what is probably his pride and joy. I just went over and gave him the money to pay for it there and then. It felt really good to help someone in need. And I haven't read out many of the people who helped once, but there are many people out there and you can sense the warmth and pride and joy in the gift that they got from giving. But now play the theme tune.

That's my least favorite moment of the week, this is...

Yes, indeed. Welcome to Mastermind, everyone. Oh, I like this bit when you tell the story. I love this bit. But the current score is Adrian has got two right and five wrong in this three option, multiple choice money, Mastermind, that I do each week. So yes, he would have done better by standing over a sheet of newspaper with the options written on it with a runny nose and letting his snot drip out to pick.

Yeah. I just thought of that quite like it. Very good. Thank you. So for the Mastermind introduction this week, I asked chat GPT to, this is what I told it, write a story that's funny about Adrian, Charles and home energy bills. This is the unedited, unfinished version courtesy of AI.

Adrian Charles had always thought himself as a man of the people, down to earth, relatable and mildly baffled by mode things. So when his energy bill arrived, it wrote it. So when his energy bill arrived and looked more like the GDP of a small nation, he decided to tackle it head on, I can't pay this. This must be a mistake. He muttered to himself.

Adrian had recently been obsessed with making his house as energy efficient as possible. It switched to LED bulb, turned down the thermostat, and laughing too much to read it properly, and even started timing his kettle boiling sessions during Radio 5 commercial breaks. AI thinks Radio 5 on the BBC has commercial breaks, but we'll let it off for that.

Desperate for answers, he decided to make it a Radio 5 Tropic, which is probably pretty true. It is what you do. Today we're talking energy bills. Mine's ridiculous. Anyone else feel like they're being charged for running a small factory? He opened his voice full of frustration.

the end of the question like that. I did one of me, I put it on the search for that. That was the economics of romance, which was very, very funny that chat GB did. Anyway, right. So here's the actual question. Adrian, your energy fixed rate deal comes to an end on New Year's Eve. You've just spotted a much cheaper deal. Which of these is the position that you are in? So your fixed rate comes to an end on Christmas Eve, on New Year's Eve this year.

You've spotted a cheaper energy deal. Are you A, free to ditch and switch at no cost? B, you can switch, but you must pay an early exit penalty. I should rephrase that, but you must pay the tariffs early exit penalty. C, you will have to wait until the fix ends to be allowed to switch.

So, I mean, aren't these, doesn't it depend on the terms and conditions? It can't do. The answer in B was you can switch, but you must pay the tariffs early exit penalty. So, A, you're free to ditch and switch at no cost. B, you can switch, but you must pay the early exit penalty. C, you'll have to wait until the fix ends to be allowed to switch. B,

You can switch, but you must pay any early exit penalties. Is that your view? Okay. So first of all, energy firms are not allowed to lock you into a deal. You must always be allowed to switch. However, they can and very commonly do within fixes have early exit penalties. We saw some of these rise to as high as 200 pounds per fuel during the pandemic.

So, men, if you run a dual fuel bill, you'd be paying £400 to leave early. They've reduced again now. They're still higher than they were, not pandemic, during the energy crisis. They're still higher than they were pre-energy crisis, but now you'll typically have an early exit fee of about £50 per fuel, so £100 per dual fuel. But the important thing that everybody who is on a fixed needs to know is this.

They cannot legally impose early exit penalties within the last 50 days of the fix. So 49 days unless you cannot be charged an early exit penalty, it doesn't matter what the contract says. Those are the regulations. There are no early exit penalties within the last 50 days.

Adrian, your energy fix rate deal came to an end on New Year's Eve. That is less than 50 days away. So the correct answer is A. You were free to ditch and switch at no cost. Please play the earth. Sorry mate.

We're going to have to confer before next week. I don't mind humiliation. I show my shortcomings, but every week they're just wrong. I've got the first two rights. I was worried. I thought all those working lunch days have taught you too much. No. You could have known this. You could have known this. I know. Well, I did know it, but I couldn't access it. I know nearly everything. I just can't get it out.

when I need to. It's in there, but I can't access it anyway.

We need to talk about energy. We need to talk about energy because we have a price cap announcement tomorrow. We're going to hear the new energy price cap rates for the 1st of January till the end of March. The price cap moves every three months. The price of cap, of course, dictates the price that over 80% of homes in England, Scotland and Wales pay for energy. Anyone who is on a standard tariff, which is basically everyone who's not on a fixed tariff or a special tariff, if you're not sure, you're almost certainly on a standard tariff.

If you're on a standard tariff, that's governed by the price cap. While it's called a price cap, almost all firms just charge at the cap. So it is the price that you will pay that will change. It's not a cap on the amount you pay. It's a cap on the standing charge and the unit rate you pay the more you use the more you pay the less you use the less you pay. So what's going to happen tomorrow? Almost certainly we're going to be told that the January price cap, having the price cap gone up 10% in October will go up again by around 1%.

I would say I would be unsurprised if it were anything from dropping by half a percent to up two percent. It will be somewhere in that range. So energy prices over this winter are not going to be getting any cheaper or not substantially cheaper and possibly getting more expensive. And then while it's much further out and we're not in the assessment period yet,

For April, we expect it to come down just only a shred, probably back to where it is right now. And then in July, again, stay pretty similar at that point. So what people have to understand is you are going to be paying the rate you're currently paying for energy roughly over the next year. And as there are fixes available where you can lock in the rate that you pay for a year, and those fixes are available right now for around 6% less than the current price,

Then the very basic, the very obvious, the very simple option on your energy bills is you may as well sit, fix, pay less now and have a guarantee that your rate won't go up over the next year because it's looking very likely that the rate is already higher now and it won't be coming down. Clearly, once we go to April and July, those are predictions and things can change depending on the global economic situation and what goes on with all the various different uncertainty situations that we have in the global macro economy.

to me but

Generally, most people should be looking at fixing unless you're more sophisticated. You want to go to one of those variable type trackers that Octopus tends to put out there and there are a couple of other options out there worth looking at. We're not going to go into that now. We did an energy program a few weeks ago where I spoke about it in more detail. But absolutely, most people right now should be looking at fixing. You're going to hear tomorrow morning that the price is almost certainly going up a smidgen and that makes it even more worthwhile to you to fix at a lower price than you're paying right now and to get the peace of mind that you will not pay anymore over the next

Next year. Got it. Do you want to do a last tell us? You do one. I've got a different page up on me, Pooter. I was in a restaurant having a lovely date night after passing my driving lesson. A meal was anonymously comped by a nearby couple. It was such a shock. The couple wanted to remain anonymous. I will definitely pay it forward one day. I mean, there is a purity about that, isn't it? Just genuinely not wanting any thanks or credit.

Yeah, there's actually, it's an old testament. Moses, my mumadees, I think it was one of the great rabbinical scholars from years ago, said that saving people embarrassment is one of the great things that we must do in life. So when we do a kindness, not letting them know it was you who did it, and you don't need to know who they were, is one of the greatest ways in that we can give. Because my grandad, my grandad refused to give me a present from Santa Claus because he wanted the credit.

So he hadn't read that particular bit of the Old Testament. You know I have a lot of simp... Well, Santa Claus was definitely not in the Old Testament. I think that's a good way to end. I can guarantee that. I may not be a great rabbinical scholar, but I know Santa Claus wasn't in the Old Testament.

Right now, sitting in with me today is podcast producer Matt, while the podcast producer Simon is away. Welcome to the show, Matt. You're going to give me a few more savings questions that we've had in so we can add a little bit more information, podcast only. Of course, you've got to listen to the podcast. We keep saying that.

But yeah, I've got a few more questions here for you. Let's start with... Ooh, let's start with Kiki, shall we? Kiki asks, for cash ices to chase the best rates, should one open each year's new one in a different bank each year? Or should you simply put everything in one pot and move that pot around each year to the best bank?

I would suggest the easiest way to operate if you're opening a new ISA that has a higher rate than where your existing savings are. Then by far the easiest option is to put your new money into that cash ISA and to transfer your existing cash ISA funds into that

at the same time. Both because that gets you a higher overall interest rate, more of your money is at the higher interest rate, but also because administratively, to have lots of different cash aisas gets quite complicated, so it's far easier for you to be able to put it all in one place. The only caveat is if you are lucky enough to be maxing out your cash aiser each year, as we talked about in the show, so you're putting the 20 grand in the 20 grand in the 20 grand.

And you get to the point where you have over £85,000 in your cash isers. Well, in that case, remember, all UK savings are only protected up to £85,000 per person per financial institution under the Financial Services Compensation Scheme Protection, which is like the Government Back Compensation Scheme. So if you've got over £85,000 at that point, you might want to start putting in all your new money into a different top-paying cash iser.

And just to say, you could still, let's imagine we're in that scenario that you've got 85 grand in your existing ISA and you want to put £20,000 in a new year ISA, you could put £20,000 in the top payer, you could then open another cash ISA that's a near top payer if your existing one isn't good, not put any money in it, but just use that and ask it to transfer across your existing savings. So you can, while you can only

Open the one new cash iser for your new money this year. You can still open another cash iser for your existing money to be transferred across to. And we've got this question here from Courtney. Courtney asks, what's the best monthly savings account for a child?

Well, I always see children's savings as a separate subject, so it wasn't something I was particularly planning to save today because there's lots of different rules and regulations about it. But I'll give you the answer, because you've asked me. The top payer right now is Saffron Building Society at 5.55%, but that's due to drop to, I think it is 5.25% in December. I'm doing this off the top of my head.

The second top pair is Halifax at 5.5% which hasn't currently announced whether it will be dropping its interest rate but I think there's a decent chance it might because it hasn't moved since base rates were cut a couple of weeks ago. But Halifax or Safron both are in the 5% and both allow you to put up to £100 a month away for your child.

Worth noting these are accounts that only last a year. So at the end of the year, like most regular savers, and I ran through some regular savers when I was doing the introduction to the podcast savings bit earlier on, at the end of the year they tend to go into easy access accounts where the rates aren't as high. So at that point, you're going to want to move out all the savings that you've put into the regular saver.

into the best-paying lump sum account that you can find at the time, and then probably restart a new regular saver, and you can often do it with the same institution to keep putting the £100 away to get the top interest. That's the way you'd operate it, whether it's kids or adults, but in this case the answer is Halifax and Saffron Building Society.

We've had quite a few questions on ISA's reaching maturity, so to speak. We've got this question here from Karen, who said, I have a fixed ISA maturing on the 12th of December. I've already used my ISA allowance for 2024-25, and it will no longer accept any ISA transfers as it's beyond 60 days from opening. Can I simply open another ISA and transfer my maturing ISA into it as the opening balance? Absolutely, yes, 100% you can. That's what I was just discussing.

The important thing with ISA is that you never withdraw the money. If you withdraw the money from the ISA, it's outside that tax wrapper, it's outside the cling film as we were talking about before, and when you put it back in, and there are certain circumstances where this doesn't count, but it's a general principle rather than the specific.

When you put it back in, you're using up your ISA allowance to put it back in. So you always transfer and absolutely you can go and apply to a provider as long as it's a provider that accepts transfers. There are a few that don't, but many do. You apply to open the new ISA and all you do is on the application firm, you put in your transfer request and you move the cache ISA money across there.

So we'll end savings there. Thank you for all your questions. If you have more savings questions or you've got questions on anything else, you can always get in touch with the team at martinluispodcast.bbc.co.uk. And if you get some nice questions, we'll try and deal with them in future shows or future podcasts.

Now, Matt, why don't we go back and do just a few more tellers? What've you got? Yeah, it was a really, really good one this week. We had some wonderful ones on the show. I've got a few more here, especially about giving back, as well as receiving wonderful unrequited kindness. I've got one here from Ali, who said that she was treated to lunch by a stranger while sighted as a shoveled and wearing a backpack back in New Zealand when I was in university. I remember the act of kindness this year when having dinner in Greece. I saw a young backpack who was nursing a bottle of water in a salad.

Told the waitress to add her meal to mine and also to add a dessert. It's very kind, very nice. Oh, that's nice. Helen, my dog, Grima's own dog, had died suddenly. She was distraught. As she had no means to get her pet back and have him cremated, I paid for her. That's nice. Sad, but nice.

We've got this lovely one here, no name left sadly, but it just simply says was 2p short last night at Aldes, but the cashier quote unquote found 2p on the side. It's just very nice isn't it? It's just a tiny little thing to do, but it makes a lot easier. Well, yeah, it's only 2p, but

We've talked before about embarrassment and that you're going up, you're at a till, you're in a supermarket, you're suddenly a tiny bit short of cash, you've queued, you just want it, it's only two P, the frustration, the looking around you, they're having to go and put stuff back. And there instead of that, the person at the till just says, it's all right. And it's that moment you just go, oh, thank heavens, that's a nice person. Well done to whoever the staff member at Aldi was. Well done and thank you.

I'll do another giving kindness. Cheryl, last year I was in a supermarket and an elderly lady was looking at tea cakes. She commented on how much she enjoyed them, but the brand she liked had doubled in price. I caught her up further along the aisle and handed her the tea cakes and the money to pay for them. She was a little surprised but grateful too. We all deserve a treat now and then. Well done Cheryl.

I've got this one from Carrie. Last Christmas, my six-year-old daughter was collecting donations to fill shoe boxes for a local homeless shelter appeal. A local man said he had some items to donate and would drop them off, which he did. When he dropped it all off, he put a card through the door with words to the effect of saying, thank you to me, the mum, for raising my daughter compassionately. And inside the card was £10 and an instruction to buy myself a coffee and a cake. He also left a voucher for my daughter.

Just all that I mean completely Completes the circle love it got this one here from Charlie He says a lads card didn't cover his lunch at the self check out while Charlie was there his pals were waiting for him So he's getting embarrassed. I asked the cashier to cancel the transaction I paid for it using contactless It's not often a minute financial position to help but I'm very happy I did when the occasion arose

And I'll finish with another one of those small acts of kindness which has a disproportionate effect, Sarah. A long time ago when I was a poor student, my card was declined when trying to buy a pen for my first year final exam. It was a £1.99 bit pen. A couple behind me bought it for me. I was embarrassed but thankful as I was right on my way to the exam.

Just you can imagine you're in that stressed moment in your life, you've got the exam coming up, you haven't got the right pen, and you're sitting there, your cards declined in the shop, you're thinking, what am I going to do? The panic feeling, the tightness in the chest is starting to rise. The people behind obviously saw that and just went, we'll buy you the pen. It's fine. Just those small acts really matter. I was having a flashback then, totally relevant to everything else. I don't know. Hey, it's my podcast, I'll say what I like.

When I did, I still have on my finger a slight lump from my university exams in my final year at university by a hideous accident of timetabling. I had all my exams in two days. I had three hours in the morning, three hours in the afternoon, three hours in the morning, three hours in the afternoon.

And by the end of the first day, my finger, where the pen rubbed against it, was bleeding and had a lump on it. And I had blue tacked, tied around the pen to try and soften it in the pain and a plaster on my finger. But obviously you have to keep writing. And then there was this gradual war of attrition.

So that the next day I'm sitting there, my finger is degrading, but of course you're trying to focus on writing your exams. If I could have typed it, it would have been so much easier. So I still have my exam scar if you like, my battle scar from my university finals. I wonder if they've invented pens, because I never write anymore with a pen hardly ever that I'd do a lot with it. I wonder if they have pens these days that are slightly softer on the fingers. When you've got delicate, sensitive fingers like mine, you need something that's just a little gentler.

Now to finish off, we're going back to savings. And it's a quick repeat from last week where we talked about our premium bonds worth it. Now, we're about to go into the mastermind question with Adrian, which is all about premium bonds. Of course, with him, I couldn't do a pre-explainer of premium bonds before I asked the mastermind question because that would defeat the entire point. But by the joy of being able to edit into a podcast, I'm now going to do that with you before we get to the mastermind question, which is about premium bonds.

Premium bonds are a form of saving operated by NS&I that used to be known as national savings, which is the government-owned financial institution, which means it's as safe as it gets because all other savings accounts are backed up to £85,000, effectively by the government backing them up. This one is totally backed up. Every penny you've got in there is backed up by the government. The only way you could be in a problem is if the government went bust when we'd all have bigger problems. So that's NS&I.

Premium bonds being around a long time are a form of saving where the capital that you put in is safe. In other words, you're always at worst going to get your money back. But the interest that you get is determined by a prize draw

Each individual bond goes into a prize draw and has a chance of winning an amount of money from 25 quid 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. Nothing like the lottery where you won't get any money back if you don't win. This way, every penny you put in is totally safe. It's in an incredibly popular form of savings.

Now, there are many myths out there about premium bonds. I often get asked, I thought my premium bonds a long time, but haven't learned 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. Because when people were buying these bonds in the 1960s and 1970s, they were buying £1, £10, £20 worth.

Now people are buying 500,000, 10,000 pounds worth. So there are just simply more new bonds. So more new bonds win more often. And there is also, similarly, there are urban myths about people in different areas winning more. That tends to just be a function as people in those areas have more premium bonds. So that's my quick warm up on premium bonds that Adrian did not get on Mastermind. And now I think we should play the theme tune.

For those who don't know, Money Mastermind, it's I ask quite Adrian a question each week. He currently in the three option multiple choice has got two right and four wrong, which means Adrian, you have now gone on to as good as a monkey picking at random because it's three option multiple choice. You've got two right and four wrong. The question, here we go. I'll settle for that, to be honest. Well, you might be worse than that for today.

Now there are a few very highly ranked poker players in public life. Victorian Corrin Mitchell of Only Connect fame and Tony Bloom, chair of Brighton Football Club, are both ranked in the top 100 England money winners. Yeah, ladies and gentlemen, what few people know is that Adrian Childs is ranked number one

in the Adrian Charles household poker rankings when his wife isn't playing. So using that incisive gambling knowledge of probability and odds, Adrian, what I would like to know this week is this.

If you put £1,000 in premium bonds at the current price fund rate of 4.4%, which is dropping to 4.1.5% at the next draw, ignoring that. We're ignoring that. We're just sticking on the current price and rate of 4.4%. How much would you expect to win with typical luck?

over the next year. So you put 1,000 pounds in, let's imagine the rate stays at the 4.4% price fund rate. How much would you expect to win with typical luck over the next year? A, 50 pounds, B, 25 pounds, C, nothing.

4.4% price fund rate, you've got a grand over a year. Is it A, 50 pounds, B, 25 pounds or C, nothings? Everybody at home, I'd like you to say your answer to yourself, either in your brain or out like that. Well, I mean, that's not the answer I've written down, I don't understand. What's the answer you've written down? We're 44 pounds.

Your three options are A, £50. Can you say my logic? What? I do. You've said 4.4% of 1,000 pounds is 44 pounds. Which are 4.4% on your return. I mean, average return based on an over a year. I didn't say average luck. I said typical luck. Just to be clear. Right. What were the options again? Sorry. A, £50. B, £25. C, nothing.

And may I just thank you, because your confusion is one of the key points I need to explain, and really brings it out very sharply as to why people need to want to start premium bonds. So I need about defining typical. OK, I should use a different place, median luck. Oh.

median luck. You've worked out the mean result. I would define typical luck as the median result. Well, Adrian's thinking, I'll just define those two different averages for you. Mean average is if you add everything up and divide it by the number that you've got, the median result is if you lined everybody up with the same number of premium bonds, you line them up all up in a row from highest to lowest, how much would the person in the middle win? That's median luck, which is what I would define as typical luck.

I would say. 50 pounds, 25 pounds or nothing? I think it's 25, but then I go, I'll probably think it's zero. Then that's the median. 25, I'm going for. Final answer, 25. Yeah. Okay. So, Adrian, you were quite right.

based on the price from rate, the mean amount you would win is 44 pounds. But what everybody has to understand, the smallest price is 25 pounds, the next price is 50 pounds. You can't win 44 pounds. You can win nothing. 25, 50, 75, 100, you can't literally cannot win because the price distribution, the smallest price is 25 quid. So you understand why now I've called it median luck, not mean luck.

Actually, the correct answer, get ready with a right or wrong buzzer, please in the studio, hopefully you've got the right or wrong buzzer this time. The correct answer is, if you have a thousand pounds in premium bonds over a year, you have a 56.5% probability of winning nothing. So the person in the middle, the person with medium luck, would win nothing. Play the uh-uh.

Well done, I was worried it wasn't coming out for a second. That's just toying with us now. Right. So this is very important to understand, and this is all about the distribution. Now, the biggest thing to understand, when they quote the prize fund, the mean prize fund, remember, that includes those few people who win the big million pounds or the very big prize. For every person who wins a million pounds, a lot of people have to win nothing, right? Because of the way the prize distribution works.

And so with 1,000 pounds, you have a 56% chance of winning nothing. You've got a 43% chance of winning at least 25 pounds, a 35% chance of winning at least 50 pounds. Now I have a fascinating graph in front of me, which is quite tough to do on the radio, but I'm going to describe it.

What this does is says that the current 4.4% price rate, because we don't have the new distribution for the 4.15%, but it will clearly be lower, I have, on the bottom row, the amount that you hold in premium bonds and your percentage expected return with typical luck, defined as median luck, the person in the middle, if everybody had the same number. And what it does is this, it stays flat at nothing.

through £100, £200, £300, £500, £800, £1,250. So you get to £1,250 and with typical luck you would win nothing. Once you go up to £1,500, with typical luck you would win just over 3% the price from rate is 4.4%.

Then bizarrely, because of the multinomial probability that is working in place, all the different price from rates, it actually drops to at around 1750 pounds, you'd expect to win just less than 3%. Then it goes up again at 2002, around 3.8%, there's a couple more bubbles, and then it starts to gradually improve until you get

to the £50,000 level where with a price fund rate of 4.4%, you would expect with typical luck to win just less than 4% because of all those people who win £1,000. But does it not say anywhere in the BOMF that for clarity, if you invest £1,000,

If everyone invests a thousand pounds, you have got more chance of winning nothing than winning something. Of course it doesn't. These numbers come from the premium bond probability calculator that I built many years ago and the mass to do it.

I had to hire a post-doctoral cosmology statistician, because it's the only one who could do multinomial probability. And then a professor of financial mathematics to approve the algorithm he had written. And it still takes the computer now. We've got much more computing power. Four hours to calculate each month based on the distribution what these odds are. They just don't exist elsewhere. So it isn't something simple to work out. The big message you've got here is

The more you put in, the closer you will get to the price fund rate with typical luck. If you're going to want £50,000, you're going to win just less than 4%. Should you be putting money in? Well, the first thing is, the big thing to remember about premium bonds is they're tax-free.

For those people only putting a small amount in and who don't pay tax on savings, which is a lot of people, because you can earn £1,000 interest of a basic rate tax pay without paying tax on savings, premium bonds are a bad bet. I mean, there'll always be somebody who beats the odds and someone has more than typical luck, but they're a bad bet. Once you start to move up to over £2,000 to £3,000 and your return is around 3.5%,

if you would otherwise be paying tax on your savings with the top easy access rates at 4.75% to 5% and the top fixed rates just a little bit lower than that. If you would be paying tax on your savings, then they start to become a decent bet with typical luck. So you will have won to fill up your cash iser already and you're paying interest on the tax on your other savings. At that point, if you've got around, you know,

A few thousand pounds or more to put in premium bonds, they become a decent bet, especially if you can max them out and you're lucky enough to be able to put in 20, 30, 40,000 or the maximum 50 pounds in and you would be paying tax on the interest otherwise. Then with typical luck, they do become something worthwhile, but most people have small amounts in.

And I accept the psychology that people like the idea of dreaming big that I could win a million pounds. I mean, you've probably got more chance of tossing a coin in it, landing on its side. But you know, per individual bond, I mean, it's won in billions to win the millions of pounds. But that does work. And the funny thing that people say to me is, yeah, yeah, but here's what I get.

Yeah, but my mum has premium bonds and she wins every month. Well, of course, how much have got in? 50,000. So you've got 50,000 pounds in. 25 pounds a month is 300 pounds a year. So that's what, that's about 2.5% interest. Put it in the top savings account. You'd be winning more each year.

You know, the concept that you win each month, you've got to contrast that to what you would make elsewhere. So premium ones can work for people who've got a lot of savings and pay tax on them and they've got a higher amount. They're not so good for smaller savers. I'll leave it there. That's it from me. I hope you've enjoyed the podcast. I hope we've boosted your savings interest. If you've got friends who'll be interested, please do tell them about the podcast and suggest that they listen and they subscribe. We tend to put out a new podcast every Thursday. If you haven't enjoyed it, it's your own fault. You've listened for far too long. See you next week.

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Martin Lewis is the founder of moneysavingexpert.com, but other consumer and price comparison websites are available. You can get in touch with Martin's podcast team by emailing martinluispodcast.bbc.co.uk. The offers and rates mentioned in the podcast are correct at the time of recording. However, if you're listening on demand, it's worth double checking as the details can date.

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