Saving a lump sum

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At a glance:

If you come into a large amount of money, how you save it will be up to you.

You may want to plan for retirement, pay off a chunk of your mortgage, or open a savings account for a rainy day.

You will also need to think about what access you will want to your money.

What is a lump sum?

A lump sum can mean different things to different people. While winning the lottery may be unlikely, there are often times in life where you can find yourself with an amount of money that’s more than you’d normally have. For example, you might have:

Inherited money

Sold some property

Got a bonus from work

Received a redundancy payment.

There is lots to think about when you’re deciding what to do with a lump sum, including the savings account you pick.

What can you do with a lump sum?

The choice of what to do with a sudden windfall are up to you. Depending on your circumstances, you may decide to save, pay off debts or plan for the future.

Create an emergency fund

Setting some money aside as an emergency fund may help you avoid money problems in the future.

If you have money in an account that you can access when you need it, you may be able to cope with a sudden bill or job loss.

Save towards a long-term goal

Buying a home, planning a wedding or splashing out for a big purchase, like a new car might be one of your longer term goals. You may want to put your lump sum into a savings account for this. You’ll need to know the rules of the account you are paying into and when you can take money out.

Some accounts are fixed for a set period, called a term. You may not be able to withdraw money without losing interest.

Pay off debt

If you have existing debt, you may choose to pay this off before you start saving.

Overpay on your mortgage

If you have one, you may be able to reduce the amount of interest you pay overall by paying off a chunk of what you owe. Most mortgages allow you to pay off 10% per year of how much you still owe.

Be careful not to overpay by too much, as you may be liable for an early repayment charge. Check the terms of your mortgage to see how much you can pay off.

Savings accounts for lump sums

Putting your lump sum into a savings account means you can be paid interest and this may help make your money go further.

The exact type that is best for you will depend on how much you have to save and if you need access to the money.

Cash ISA

A cash ISA is a tax-free way to save. In the 2025/26 tax year, you can pay up to £20,000 in ISAs. A tax year runs from 6 April one year to 5 April the following year.

There are two types of cash ISA:

Easy access cash ISA

Good for flexible savings. You can usually add money or take it out when you need to. It's best to check the terms of the account you choose.

Your interest rate can go up or down.

Fixed rate cash ISA

Good for lump sums you don't need access to.

You get a guaranteed interest rate for a set amount of time, usually between 1 and 5 years.

You usually cannot take money out or close your account before the ISA ends.

There are rules about how much you can pay in, how many you can open and transferring a Cash ISA.

ISAs explained

Fixed rate bond

Fixed rate bonds are another option for lump sum savings. You are not able to take any of your money out of a fixed rate bond until the end of the term that you’ve committed to.

If you think there’s even a chance you might need your money before the end of the term, it’s probably best to not to tie your money up with this type of account.

Regular savings account

A regular savings account can be more suited to smaller payments over a longer period. This may be an option if you want to pay in over a longer period of time instead of all at once.