Lump sums explained

What is a lump sum?

Lump sums are large amounts of money, paid in one go. See what they mean for savers.

What are lump sum payments?

A lump sum is a payment that’s made all at once, usually involving a large amount of cash. It’s different to instalments, where you receive or pay out smaller chunks of money over time.

As you go through life, there are plenty of moments when you might receive lump sums. For example:

  • Money from a property sale.
  • Christmas bonuses from your employer.
  • Redundancy payouts.
  • Gifts from friends or family.

Lump sums may come from unexpected windfalls too. Here are just a few examples:

  • Winning a competition.
  • Inheritance payments after a loved one passes away.
  • Tax refunds from HM Revenue & Customs.

You could also build up a lump sum by gradually making savings. For example, by putting a bit of money aside each payday.

What could you do with a lump sum payment?

There are lots of ways you could use a lump sum, whether you’ve been handed a one-off payment, or have saved money over time:

  • Paying the lump sum into a savings account. This could help you put money away for a future event or goal. For example, planning a wedding, buying a house, or dealing with university fees. Or perhaps you want an emergency fund to fall back on.
  • Covering a big purchase. A lump sum might also help with short-term costs. Like a new car or family holiday.
  • Reducing your debts. You may have the option to pay down a loan, credit card or overdraft.
  • Making mortgage overpayments. Your bank might allow you to overpay a specific amount.

How to save a lump sum of money

Decided to save a lump sum? Comparing different savings accounts could help you find the right fit for your needs.

Individual account eligibility criteria apply.

Fixed term savings accounts

With these accounts, you can lock your lump sum away for a fixed time. For instance, leaving it untouched for one or two years.

In exchange, you’ll be given a guaranteed interest rate. This won’t change till the term ends. It may give you a clearer idea of what your money will earn.

Instant access savings accounts

Also known as easy access accounts, these can let you pay in money as and when you want to. It could be a large, one-off lump sum, or a series of smaller payments.

You can also take your cash out whenever you need it.

But the interest rate might not be as high as on fixed term savings accounts.

Cash ISAs

A cash ISA works like a normal savings account, except your interest should be tax-free.

You’ll just need to stay within a £20,000 annual allowance.

With instant access and fixed cash ISAs available, you’ll find different options for saving lump sums.

Pros and cons of putting lump sums in savings accounts


  • Opportunity to earn interest. This can give you a return on your lump sum.
  • Plenty of variety. You’ll find different account features and interest rates to suit different savers.
  • Protection if things go wrong. The Financial Services Compensation Scheme can offer a safety net to savers.


  • More pressing priorities. Saving might not be the right call if you have debts or big purchases on the horizon.
  • Rules and restrictions. Some savings accounts may limit access to your lump sum. Others might come with minimum or maximum deposits.

How does interest work on lump sum savings?

Before paying a lump sum into a savings account, it’s useful to double-check whether the interest rate is fixed or variable.

A fixed rate will stay the same for a set time. On the other hand, a variable rate may rise or fall. For example, if the Bank of England changes its base rate.

You may also see different types of interest rate. A gross rate displays the interest before any tax deductions are made.

Meanwhile, an Annual Equivalent Rate (AER) shows the interest you might earn over a year once compounding is factored in. Compounding refers to interest that’s earned on previous interest payments.

FAQs on lump sum savings

Learn more about savings accounts

Find an account to suit you

From instant access accounts to fixed rate options and a range of ISAs, take a look at our selection.

Bank vs savings accounts

See how bank accounts differ from savings products in our handy guide. Compare their main features.

Turn change into savings

Round Ups is available to customers who have an eligible current account, an eligible instant access savings account and are registered for the NatWest mobile app. Round Ups can only be made on debit card and contactless payments in Sterling.

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