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.
