‘Can my £100k windfall fund retirement and some fun?’

Dear Becky

QI take home £1,500 per month after tax, with monthly outgoings £700. I am about to retire aged 64, so I won’t be receiving my state pension for two years. I am married and our mortgage, paid for by my husband, will be paid off in February, but we have always kept our money separate. He is due to retire in March 2026. He gives me housekeeping, pays the mortgage and council tax but will not support me.

I have a Nest pension with my employment, which has £7,000 and will only pay £270 per year if I take the £2,500 lump sum, which I plan to. I also have a council pension, due to pay £6,000 a year, or £4,000 if I take the lump sum of £5,800, which I do.

I receive a share of my ex-husband’s pension, which I have been drawing since my 62nd birthday, currently £416.16 per month after tax (equivalent to just over £6,000 per year), although I assume this monthly payment will increase in January as I will no longer be earning an income and therefore will no longer be taxed on this, along with an annual rise each April. Thanks to saving £50 per month into them, along with the lump sum I took from my ex-husband’s pension, I have the maximum amount invested in Premium Bonds which I do not want to touch.

I have just inherited £100,000, which is in an NS&I instant-access account paying 3.65pc interest. I will have to use some of this to cover my bills and outgoings until I receive my state pension, and would like this to be along the monthly £1,500 sum I take home while earning, which can, from January include my ex-husband’s pension income. I am happy to invest in fixed-rate bonds, and consider a stocks and shares Isa. I want to take two holidays each year, plus watch two England matches in London for the full five days, which can also cost £800 per Test all in.

Dear Paulette

AThe spending and wishes you set out are in line with the Pensions and Lifetime Savings Association (PLSA) “moderate” to “comfortable” living standards. For a single person, a moderate living standard is anticipated to cost £23,300 a year and a comfortable lifestyle, £37,300.

You mention credit card repayments of £250 a month. If there is an outstanding balance, you should pay it off in full. If you wish to maintain the £1,500 a month income for the next two years, and this can include the amount you receive from your ex-husband’s pension, then you’d be taking a total of about £24,000 from your inheritance.

To access this monthly income, you have options. For example, £20,000 of that £24,000 could go in a top-paying cash Isa (annual allowance is £20,000), and the rest perhaps in an instant-access savings account for the next two years. Best buy instant access accounts currently pay around 5pc.

The interest on whatever inheritance money you store in savings would be taxable once it surpasses your personal savings allowance of £1,000 in tax-free interest. This doesn’t apply with an Isa.

Not only are Isas tax free, cash Isa rates are up to 5.15pc. So you might want to consider cash Isas both for the money you need in the next two years, and then also maybe in subsequent years enabling you to make use of each year’s annual Isa allowance of £20,000.

Always consider the £85,000 compensation limit per institution, per account when choosing how much to deposit and where. It’s also important with savings accounts and cash Isas to continually renew the rate of interest you are receiving.

If you did feel like taking a bit more risk, particularly for any portion of money you won’t need for several years, then you could divert some of that £20,000 annual Isa allowance to a stocks and shares Isa.

Becky O’Connor is director of public affairs for PensionBee, the online pension provider. Write to Pensions Doctor with your pension problem: Email questions to pensionsdoctor@telegraph.co.uk