These include Universal Credit, Housing Benefit, Pension Credit and Council Tax Support, which are all designed for those on low incomes and take into account any capital you have (including savings accounts, investments, Premium Bonds and property), which means if you are in receipt of a lump sum payment your entitlement may be reduced, or you may not be able to claim at all. Find out more about the FSCS and similar schemes by reading our depositor protection scheme guide.Ī lump sum could have a significant impact on your eligibility to claim certain means-tested benefits, as the amount you get typically depends on your income and any savings you may have. Make sure to bear in mind that the Financial Services Compensation Scheme only protects £85,000 of savings per person per banking licence, so if you’ve got a bigger sum than this, you may want to split it between different banks, or opt for an NS&I account which is 100% backed by the Treasury. However, where you ultimately choose to save your lump sum will depend on how much you have. This way, all interest earnt is entirely tax-free and will continue to be so for the duration you keep your money invested, regardless of what happens to savings rates and the PSA in future. If you haven’t used your ISA allowance for the year and the lump sum amount doesn’t take you over the £20,000 annual limit, investing in an ISA – be it a monthly interest account, easy access or fixed rate ISA – could be an ideal solution. It’s important to remember that investing a truly significant lump sum in a savings account could result in you being taxed on the interest earned if it exceeds the Personal Savings Allowance (PSA), which is where an ISA can come in. This option gives you limited access to your funds, or often none at all, but has the benefit of generating more interest over the long term, with savings rates typically being higher on fixed bonds than easy access accounts.

Or, you may want to invest in a fixed rate bond, which will allow you to watch your initial investment grow with the benefit of compounding. This has the benefit of keeping the original capital intact while giving you a regular cash boost, though bear in mind that the effects of inflation may erode the value of the original sum over time.Īnother option is to use the amount to provide an income directly, in which case being able to access your money is key – perhaps keeping it in an easy access account where you can dip into your savings pot whenever you wish. The main options are:ĭepending on the size of the lump sum you may be able to use the interest generated to supplement your income, such as by opting for a monthly income savings account and getting the interest paid away into your current account. This will all come down to what you want to achieve from your savings.

Long term savings planner