16 October 2025
general
While receiving a large sum of money is often cause for celebration, it can also leave you wondering how to put it to use.
Whether received as a company bonus, inheritance, or even a jackpot win, when used wisely, a windfall can help improve your financial prosperity for the long term.
Asking 2,000 UK adults to select three ways they would use a large sum of money, Together Money found:
But making the most appropriate decision for your circumstances isn’t always straightforward. There are multiple factors to consider – not least, the amount of money you receive.
Read on to explore four key options for using a windfall to boost your financial prosperity, including their pros and cons.
1. Saving can help keep funds available, but growth depends on interest rates
If you’re likely to need access to your funds in the years ahead, saving can be a good option to keep your money within reach. However, it’s worth noting that some accounts may restrict your access for a defined term.
Typically, your money will grow with interest in a savings account. The rate at which it grows can vary significantly depending on the interest rate and type of savings account you choose.
There are a few options to choose from:
In some cases, you might choose to spread your funds out across multiple types of accounts with varying term lengths and interest rates. This strategy, known as “laddering”, can help keep some of your funds accessible, while the rest grows at a higher interest rate.
Read more: The art of “laddering” and how it could help boost your income in retirement
Depending on the amount of interest you earn, you may need to pay Income Tax on interest your savings generate.
Remember to keep Income Tax in mind if you’re placing a large sum into interest-earning accounts. ISAs could be a great option here, because they don’t attract Income Tax on interest gains – although there is a limit to how much you can put in each year.
2. Investing can reap higher rewards, but returns are not guaranteed
If growing your wealth over the long term – a decade or more – is a priority, it might be worth considering investing in the stock market.
According to MoneyAge, savers have accrued interest at an average rate of 2.85% a year since 1999. Meanwhile, investors in the FTSE 100 have seen average returns of 4.4% a year.
As a result, between 1999 and 2025, someone investing £20,000 a year could have gained over £134,000 more than someone saving the same amount.
However, although the rewards can be higher, so are the risks. Most investments come with an inherent risk of losing some or all of your initial sum, and historic trends are not a guarantee of future stock market performance.
Additionally, as of 2025/26, you may be taxed on your investment gains held outside of an ISA or pension.
That said, with an investment strategy and portfolio curated to your risk appetite, investment goals, and preferences, you may be able to grow your wealth at a higher rate than through interest. At the same time, you could mitigate the risk of significant losses and maximise tax efficiency.
3. Contributing to your pension could help grow your retirement fund tax-efficiently
If you don’t expect to need the funds until after you retire, saving into a defined contribution (DC) pension could be a good way to grow your wealth tax-efficiently.
Typically, funds held in a private or workplace pension scheme are invested in a range of assets. The returns on these investments are continuously reinvested, leading to compound growth. Unlike investments made outside of a pension, these returns typically don’t attract Dividend Tax or CGT, although you may pay Income Tax on some withdrawals.
Additionally, you may be able to claim tax relief on your contributions up to the Annual Allowance, at your marginal rate of Income Tax. While the allowance is generally £60,000 a year or 100% of your earnings, whichever is lower (as of 2025/26), it may be lower if you have a high income or have flexibly accessed your pension.
While your pension provider may be able to claim tax relief at source at the basic-rate of Income Tax (20%), higher- and additional-rate taxpayers may be able to claim an additional 20% or 25% respectively by completing a self-assessment tax return.
It’s also worth remembering that you will usually be charged Income Tax when you enter drawdown. As of 2025/26, you can take up to 25% of your pension pot as a lump sum, up to a maximum of £268,275.
4. Overpaying your mortgage can help reduce your interest payments over the mortgage term
If you’re confident you already have enough set aside in savings, and don’t have any other significant debts, you might consider overpaying your mortgage.
By paying more than your usual monthly amount, you can generally reduce the amount of interest added to your mortgage. As demonstrated by IFA Magazine, if you had a £200,000 mortgage charging 5% interest over 25 years, and overpaid by £200 a month, you could save over £30,000 in interest.
Keep in mind that some mortgage lenders will limit the amount you can overpay each year. Typically, this is 10% of your total mortgage amount. Exceeding this threshold can mean you incur an Early Repayment Charge (ERC), diminishing the value of overpaying.
In some cases, you may be able to repay a large lump sum when your mortgage term ends and you remortgage. However, this can depend on your provider’s own regulations, so it’s important to check your mortgage terms before making an overpayment.
All this said, in many cases it may be more beneficial to invest any additional funds towards your retirement. Delaying retirement planning in favour of being mortgage-free could be detrimental, while the compound returns and long-term growth offered by long-term investments may be hugely beneficial to your future.
Get in touch
Whether you’re looking to save, invest, or grow your retirement funds, we can help you create a financial plan that suits your needs and circumstances.
Email enquiries@jesellars.co.uk or call 01934 875 919 to find out more about how we can help you.
Please note
This article is for general information only and does not constitute advice. The information is aimed at retail clients only.
All information is correct at the time of writing and is subject to change in the future.
Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.
The Financial Conduct Authority does not regulate tax planning.
A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance.
The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts.
Workplace pensions are regulated by The Pensions Regulator.
Your pension income could also be affected by the interest rates at the time you take your benefits. The tax implications of pension withdrawals will be based on your individual circumstances, tax legislation, and regulation, which are subject to change in the future.
Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.
Your home may be repossessed if you do not keep up repayments on a mortgage or other loans secured on it.
