How to manage a windfall: what to do with a £10,000 lump sum

The FCA has warned wealthy savers they have too much in cash, but beneficiaries of windfalls are still hugging safe havens and losing out

Person holds wad of bank notes after receiving windfall.
How to manage a windfall: what to do with a £10,000 lump sum
(Image credit: FJZEA via Getty Images)

A financial windfall, whether expected or out of the blue, comes with a choice – do you save, spend or invest it? What you decide could be the difference between doubling your money or missing out on thousands of pounds.

In what is being called the Great Wealth Transfer, an estimated £5.5 trillion of UK assets is predicted to be passed down between 2022 and 2050, the largest flow of generational capital ever seen.

While some of this will be eaten up by inheritance tax, decisions will need to be made about what’s left over. For example, beneficiaries may consider keeping it in a savings account or an ISA.

Subscribe to MoneyWeek

Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Get 6 issues free
https://cdn.mos.cms.futurecdn.net/flexiimages/mw70aro6gl1676370748.jpg

Sign up to Money Morning

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Sign up

In a separate article we look at how to choose between a cash ISA or a stocks and shares ISA.

So, what do people tend to do with a windfall? The answer will depend on personal circumstances, but fund manager Fidelity International has analysed a survey of 1,000 investors and asked what they would choose.

With a smaller sum of £5,000, people typically allocate the largest share to cash savings, followed by investments, the research found.

On average, people would save £1,900 (38%) of this amount and invest £1,550 (31%). They would spend £850 (17%) and put £400 (8%) towards paying off any debts.

Interestingly, their behaviour would likely remain the same if they were to receive a larger sum.

For a windfall 10 times the amount – £50,000 – on average, people would save 35%, invest 34% of the total, spend 15% and put 7% towards repaying debts.

Ed Monk, associate director at Fidelity International, said: “Regardless of the size of the windfall, it’s important to have a plan in place for how you would use the money.

“Naturally, many of us might spend a small amount of this and indulge or use it to pay off any debts we may have, but after that there is a question about whether investing or saving is best.”

Swipe to scroll horizontally
Average proportion of windfall people typically allocate to the following:

£5,000 windfall

£50,000 windfall

Save

38%

35%

Invest

31%

34%

Spend

17%

15%

Debt repayment

8%

7%

Source: Research conducted by Opinium on behalf of Fidelity International from 6-11 February 2025 among 1,000 UK investors.

How much could I get by investing £10,000?

More than one in ten (13%) of respondents said they invest because of a windfall – such as an inheritance, gift or bonus. This figure is likely to increase significantly in the coming years as the Great Wealth Transfer gathers momentum.

Fidelity looked at the returns that would have been generated by investing a lump sum of £10,000 over the past five, 10 and 20 years, against different benchmarks.

A one-off investment of £10,000 invested in the S&P 500 would have doubled to £18,474 over the past five years.

This is much better than anything a cash account would have given in that time.Someone who invested £10,000 in a cash ISA in December 2012 would currently have £11,955, according to analysis by wealth firm Quilter. Adjusted for inflation, this is just £7,918.

The Financial Conduct Authority has just warned millions of wealthy savers who have £10,000 or more in cash they aren’t investing enough and are confining themselves to stagnant returns eaten away by inflation.

Swipe to scroll horizontally
Returns from investing a lump sum of £10,000 over the past five, 10 and 15 years

MSCI World Index (Total Return)

S&P 500 (Total Return)

FTSE 100 (Total Return)

5 years (30/04/20 - 30/04/25)

£17,592

£18,474

£16,383

10 years (30/04/215 - 30/04/25)

£26,534

£32,964

£16,073

20 years (30/04/05 - 30/04/25)

£60,654

£81,615

£30,022

Source: Calculations based on the assumption of making a one-off investment of £10,000 and calculating returns as of 30/04/25. Returns calculated over 5,10 and 20-year timeframes. Calculations include fees of 1.1%, based on an annual management charge of 0.75% and platform fee of 0.35%.

Monk said: “While there is no guarantee we’ll see a repeat of this performance in the years to come – and with recent volatility a reminder that markets can both rise and fall – the figures do help to paint a picture of the long-term growth opportunities created by investing.

“It's important to remember there is no pressure to make a decision right away, so take your time to figure out what course of action is best to achieve your goals – and if you need further support speak to a financial adviser.

“While a windfall is a lump sum, you can still drip-feed regular contributions rather than investing the full amount in one go.”

Five point plan for managing a windfall

  1. Get your finances in order – use some money to pay down debts and create an emergency fund if you don’t have one.
  2. Open a stocks and shares ISA – once you’ve opened an account, you might want to set up a plan to add to it regularly, allowing you to stagger your contributions.
  3. Gift your windfall – for those who would eventually leave their windfall and wider estate to their loved ones, it’s worth considering gifting this ahead of time, because if you survive seven years after making the gift, the beneficiaries won’t have to pay inheritance tax on it.
  4. Consider making additional contributions to your pension – contributing to your pension, even a one-off lump sum, will benefit from compounding over the long term and can result in significant gains to your pension pot.
  5. Take financial advice – a financial adviser will listen to you before coming up with a personal recommendation that’s based on your personal situation, goals and timeline.
Laura Miller

Laura Miller is an experienced financial and business journalist. Formerly on staff at the Daily Telegraph, her freelance work now appears in the money pages of all the national newspapers. She endeavours to make money issues easy to understand for everyone, and to do justice to the people who regularly trust her to tell their stories. She lives by the sea in Aberystwyth. You can find her tweeting @thatlaurawrites