Lottery Winners: Lump Sum vs Annuity

Some lottery winners get to decide whether they would prefer to receive their money in a lump sum or as an annuity. Whether they get a lump sum or annuity can depend on the particular game that they play, or the lottery provider. Each has its own benefit, and the different options could help people in different ways. In this article, we will break down both situations and the potential they hold for the future of the lottery winner.


What is Annuity in Regard to the Lottery?


An annuity is a regular, guaranteed stream of money. More commonly it is used in the terms of retirement, however, in the world of lottery pay-outs, it is a term that matters too. It can be set for an agreed number of years or for the rest of your life. A constant, dependable flow of money to help you out. We have seen more lotteries offering annuity in  recent years.


What is a Lump Sum Lottery Winning?


A lump sum refers to someone receiving a large chunk of money all at once, like we do with The Health Lottery draws. This payment style is usually what comes to mind when you imagine someone receiving their lottery winning. With all the money upfront, you can make larger purchases such as cars and homes and big investments into stocks or businesses for your future.


Should you take Lump Sum or Annuity Lottery Winnings?


When given the opportunity, lottery winners can decide which of these two options fits their life best. Different things work for different people and there are benefits to both situations. Below we have gathered some of the top benefits of each.


Why Annuity is a Great Option:


A dependable flow of money undoubtedly has its benefits. Being able to budget accordingly and plan your life around a guaranteed financial standpoint has an appeal to many – and that is what makes annuity a great pay-out option.

If you consider yourself a poor money manager or someone who loves an impulse buy, this option will keep your money secure. That means not blowing it right away as some other winners have been known to do. In most cases, your lottery annuity is a set-in-stone agreement that is extremely inflexible. That agreement can create security for years to come, for you and your family.


Why A Lump Sum is a Great Option:


A lump sum of money will give you all of your winnings at once. This decision will let you keep some money on hand for a rainy day, family emergencies, or for fun occasions. It also allows you to make financial investments that could turn your winnings into larger sums if done right. This opens up a lot of new opportunities but also room for error.

The biggest appeal to a lump sum is that it gives you complete control of all your winnings, right away.


Do You Get Taxed More with Annuity


In the UK, there is no tax on any form of lottery win – you can read more in our article about taxes on lottery winnings. This is true for both annuity and lump sums. If you win £1 million on a lottery ticket, scratch card or other form of gambling in the UK, you will receive £1 million into your bank account. This makes both options extremely attractive as you do not have to worry about any taxation.


Lump Sum vs. Annuity


Now that you know the difference between a lump sum and annuity, along with the benefits of each, you can make the decision on which option is best for you. Would you rather collect your winnings all at once like these lottery winners who bought amazing houses? Or would you prefer to space out your winnings over a long period of time?

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