Pension lump sum - what to do with it

When I took a lump sum, as I hadn’t drawn on my pension for 10 years, the tax people wanted to tax me on the whole sum and they did.
However, after many phone calls, over many months, I presume I got to near the top person, it was refunded, just before COVID.

The only thing that will give you a better return than an ISA is a little clutch of resue dogs x

Basgetti

Rest can go in an isa in your name.

Yes.
An ISA each maybe for a fixed two year period.That way, if you need to take out some money early you can still get it but lose some of the interest.
You never know when you may need some cash, a car, a private operation and so on.

Rest can go in an isa in your name.

I was in charge of DHs pension and the cash sum, I split the cash sum up and put it all into various savings pots and I too bought premium bonds for both of us. That cash sum has been invaluable over the years

Our lump tax free lump sum was used, in the main, for two fabulous holidays!

You only live once!

"Ideally would like it to keep up with inflation."

I know this one has been running a while, but on the inflation part nobody has mentioned index-linked gilts: the amount they pay back rises with RPI, so if he buys one maturing around when the money might be needed and holds it to the end, that slice roughly keeps pace with prices. Easy-access accounts and Premium Bonds are fine for the "might need it next month" money, but the range of income-paying options for the rest is a good deal wider than most of us are ever shown at the bank.

Meant to say - they are happy in my area to work with 50k - I know this as working with "up to £50,000" has one rate and above that it changes in 50 or 100 thousands.

The one we used when my husband retired wanted clients with 300k plus.

We had an IFA once when my husband retired.
We now have a small-ish inheritance on the way and will probably use one again.

We found our IFA through personal recommendation and we certainly did not have a sum approaching anywhere near £500,000. We have now more than doubled our original investment, which are held in S & S ISAs, over the past ten years.

Still fairly current advice and ideas then. Some "old" threads are far more informative/interesting than current ones.

Premium Bonds can pay out and your original sum remains safe albeit reducing in value due to inflation. My mother had the maximum holding and win a few £50s over 20-odd years. I've never won anything.

Im thinking that the op has worked out where to put their money. This thread is 10 months old

Any spare Dosh I have goes on premium bonds, if you have a substantial amount invested, you'll win something most months.....

I was looking back through pension safety net options and wanted to share what worked for us. When £35k is the whole emergency fund, safe is definitely the way to go over taking risks with shares.

Maxing out the £20k Cash ISA right away is the smartest first move. For the remaining £15k, a high-interest fixed account or notice account usually beats standard savings while keeping it protected under the FSCS.

When my parents took their lump sum, I used The Investors Centre just to compare safe UK rates and check which accounts had proper FSCS backing. It made it way easier to pick a high yield without stressing over risk."

Thanks everyone, really helpful comments. Just to answer a few points. The lump sum came through today so he has made his choice on that. The amount seems to be too small for a financial adviser. His annuity will die with him which means he gets more pension income. The reason for this is that I am younger by 11 years and have a bigger pension pot, so when I get to the same stage I should have enough to support me on the assumption I outlive him. If we were the same age we would have done it differently.

We will take a look at this over the weekend, but a big thank you to everyone who has replied. It has been really helpful. I think he will probably do a small amount in a savings account and some in a stocks and shares ISA.

Have a look at Raisin as previously suggested by Loujoamk They do good rates

I retired from teaching 3 years ago and my advice is
1. Pay off any debts - the interest is higher than what you can earn in accounts. I paid off car loan for example.

2. Fixed term ISA - I did 2 years at a time just in case I needed money. I looked for highest savings ISA as I am adverse to any risks despite knowing economic market quite well. Otherwise - stocks and shares ISA does pay more !

3. I use Raisin and keep an eye on high interest offers and move money when it’s available. I try to keep some accessible to me for any last minute plans / holidays. For example, regular digital saver accounts are quite good - and Chase often have deals offering extra interest too. Most of the incentives have limited time so watch for when the interest drops too !

All of this because I now have time to take care of my finances ironically. I find Martin Lewis’s advice pretty reliable.

My advice Put a lump sum in a long-term savings account and forget about it. With the rest? Go on holiday somewhere fabulous and enjoy the returns from a long time of hard work.

You can find slightly higher rate savings accounts. Tesco are doing a fairly good Internet saver if you want easy access with a reasonable rate. You can often take a regular Saver account at the bank which also gives a reasonable rate. You could use the money from Tesco to make the monthly payments, thereby making the best you can of the interest rates. We found that ISAs don't generally give such a good rate of interest.

He could take a drawdown each month to the equivalent of an annuity. The rest stays invested until he needs it. An annuity dies with him therefore leaving nothing for you. You could have a joint annuity but that would be half the rate per month and that would continue after his death. I have a drawdown and the growth has outstripped any ISA. Drawdown every time

Calendargirl

I used my lump sum to buy premium bonds for DH and me.

We have done well with them, but I know it’s not guaranteed to win and no interest.

But it’s government backed and you can always cash them in if required.

Also tax free and a bit of fun, I don't do any gambling as I don't want to lose money so premium bonds are my bit of a safe flutter.

My DH got a good lump sum with his CS pension and he bought another btl property. We already have a few so are experienced in handling them. The property price will likely go up and he'll gain about £250 pcm from letting the property. He's bought through a ltd company so can offset mortgage interest cost and it's an interest only mortgage. He was careful to buy an EPC B house with solar panels to future proof as much as possible. To buy a btl you have to put down a minimum of 25 percent of purchase price plus additional SDLT. It might not be a popular choice but it makes good financial sense.

It depends a lot on peoples personal circumstances imo.

As my own personal retirement age got changed by the Government (yep...I'm a WASPI woman) and put up to about 3 years older than my own retirement age of 60 = I had two options job-wise:
- I could have carried on a little bit longer in the job before resigning for retirement. But I didn't anticipate that what was left of my job would remain very much longer (only a matter of months - and I was correct). So I could have hung on in there that few months and then got redundancy money from them for having been made redundant. Obviously I would have like that money and it would have been a noticeable amount. But I loathed/loathed/loathed the job with a passion anyway and decided to stick to retiring at my own retirement age/still the employers retirement age for "longer-serving" staff. Thus I knew I'd have to use some of that lump sum to subsidise the missing State Pension until it eventually turned up late (as the job pension is so low).

- I had to move elsewhere in the country because I still didn't have the "forever home" house I'd expected at some point in my 40's-50's. So I had to move to a cheaper area to get it and cover the fact I knew my brother well enough to know he'd be grabbing for the lions share of inheritance money at my expense (he did!). It's an area where the houses tend to be in worse condition and more old-fashioned than I'm used to - so I used up all the spare pension lump sum and some savings I had myself to gut the house I bought here and get it to my definition of "normal standard".

So - yep:
a. Subsidising my little job pension until I reached my "revised State Pension Age"
and
b. Getting house elsewhere in country up to the standard I'm used to seeing.

So:
- do you need any major work on your house (assuming it's a "forever home" one)? Work is only going to get dearer. It got dearer after the Lockdown recently and there's a distinct suspicion the Government might run another Lockdown at some point and they have been caught out doing some planning-in-case they have another one. If they do - that would put prices up yet again (even though fewer would comply with a second one).

- do you need to "subsidise" your income until it's all coming in - or do you currently have all the pension income that is due to come in ever?

Other thought being whether you have private medical insurance - just-in-case. I do personally - as I've seen for years which way "the wind is blowing" on that one. But - I mentally keep some money reserved in case (especially because I've moved from England to Wales - where the NHS is even worse).

In an ordinary savings account.