What happens next for lottery winners?

What happens next for lottery winners

Imagine checking your numbers to discover you’ve won the jackpot? It’s something dreams are made of, and if that day ever comes, you’ve probably spent the money in your head a few times over. But before you jet off on a spontaneous trip to that desert island far away, what happens next for lottery winners?

In a previous article, we explored some of the emotional and practical decisions you need to make if you won the lottery. So, this time, let’s look at the implication of your financial decisions and how to prevent ‘sudden wealth syndrome’

Around 85% of winners choose to remain anonymous

You’ve probably seen countless stories in the media where lottery winners, only go on and lose all their money and, in some cases, even go bankrupt. When you glance at the fortunes of past lottery winners, you will see numerous examples of those who have regretted their financial decisions. So that’s why whenever you have a big life event such as winning the lottery, you should always use an experienced, qualified financial planner to help you plan and manage your winnings as safely and securely as possible.

Such a significant influx of money can be a rush at first, but then reality sets in.

‘Sudden Wealth Syndrome’, a term coined by psychologist Stephen Goldbart, is the collective name for the psychological issues that can come with new and sudden wealth. A windfall like a lottery win can leave you confused, guilty even. And the potential for misguided decisions or destructive behaviour is high. So now is not the time to do anything rash.

What are the options for lottery winners?

Lottery winners have three options for managing their winnings:

  • Spend it – the desire to spend lottery winnings may be overwhelming, and for some people, this might be the right thing to do. However, before you go ahead, assess your priorities. Spending your winnings too quickly could result in you missing certain opportunities that could enhance your life in the present and the future.
  • Repay debt – you may still have a mortgage on your home, personal loans or credit cards that need paying off. Repaying all your debts could give you a sense of security. But sometimes, it might be better to save your winnings and continue paying debts off monthly. Consider whether paying off debts will free up enough income to achieve your life aspirations and ambitions.
  • Invest it – the decision to invest your money wisely could provide you and your family with financial security for life. At the time of writing, inflation is rising fast, which will erode your money’s value. But it’s crucial that you choose a level of investment risk aligned to your goals, proportionate to how long you plan to invest and that is tax efficient.

Develop a financial plan

The answer to knowing how much you should spend, save, and invest from your lottery win can be found by developing a financial plan. Winning the lottery is a life-changing experience. So, you’ll need to build a plan focused on what you want from life and your vision for the future. This will involve forecasting your wealth over your lifetime and noting anything that has changed because of your lottery win.

Consulting a professional financial planner will help you make these important decisions. It’s essential to find a financial planner you can trust, and it’s crucial they have experience in dealing with lottery winners. Although you will be happy celebrating your good news, there will be times when your win could feel stressful in the weeks and months that follow. Having a financial planner on your side, who knows what you are going through, will be invaluable.

Together we will look at your options, showing you what is possible for you to achieve with your winnings. We’ll also optimise your newfound wealth with careful planning, minimising taxes and helping you make the most out of every penny. Your plan will show you the impact on your life by taking different decisions and whether your lottery win is enough to help you achieve all your desires.

We can recommend a secure, short-term home for your winnings until you can make more concrete decisions. Then, we will guide you in every step to maximise the benefits of your good fortune.

For more guidance, we have a dedicated guide for lottery winners available to download for free below.

Download our essential guide

Specialist advice

If you have been fortunate enough to become one of the lucky lottery winners, this is a one-off opportunity to change your life, and the key to enjoying a lottery win is to have specialist, trusted, advice. Whether your priority is to share, protect or grow your winnings, every step will need managing carefully.

If you’re in that lucky position, book a free consultation with our independent and experienced financial planners to discuss your concerns and find out how we can help. Click the button to get started.

Request a confidential consultation

What do I do with my winnings in the short term?

Once your win has been officially confirmed, which will vary depending on the lottery provider, you will need to find a temporary safe home for your money while you decide what to do. It may be a few days or weeks before you feel ready to contact a financial planner for support and advice. As a short-term step, we suggest placing this in a deposit-based account. This means you will get some interest, but crucially, the value of your capital will not fluctuate while you make your decisions.

Check the bank or building society is covered by the Financial Services Compensation Scheme (FSCS). If you plan to hold money on deposit for less than six months, you may be covered for up to £1 million under their temporary high balance rules.

Otherwise, bear in mind the FSCS only provides cover for up to £85,000 per person or £170,000 for joint accounts. For some wins, you will be able to open a few accounts and split your winnings across several banks or building societies. But please ensure each bank has a different banking licence or you will not be full covered – people can often get caught out by this. National Savings & Investments accounts are fully protected against failure, regardless of the balance so they are also a good option, although there are maximum amounts you can deposit with them. For larger wins, you may want to explore other options to keep your money safe while it grows. A financial planner experienced in this area will be able to advise you.