How to make your work bonus work hard

You’ve worked hard for your bonus, now let's let it work hard for you! Below we look at a handful of options for spending or saving your hard earned money.. 

Chip away at debt

It might not give you the same feeling as spending it on something nice, but using some or all of your bonus to clear a chunk of debt might make it go further than any of the other options below.

Overpay on your mortgage

Although they tend to be less expensive and less flexible, mortgages are still a debt. If you can afford to, then overpaying on your mortgage could save you some money and get your mortgage free much sooner

Bolster your savings

Easy access savings rates remain low but they might be a good option if you're saving for the future, or just want to build up your 'emergency fund' to cover anything that comes up.

If you’re happy to do so, you could opt for a longer-term but more significant investment such as a Lifetime ISA if you’re a first-time buyer. You'll get a 25% match from the government for savings you put into this kind of account, with a maximum bonus of up to £1,000 per tax year. You'll need to use it for a first home or after you turn 60, otherwise you could face a hefty 25% penalty. For more information on all the ISAs available, read this guide.  

Boost your pension pot

Contributions to your workplace pension scheme are highly tax efficient and redirecting some or all of your bonus to your pension might also qualify you for additional contributions from your employer.

If you’ve not yet received your bonus you could also ask your employer if they would allow you to redirect some or all of it to your pension, known as ‘Salary Sacrifice’. And some employers will also increase your sacrificed contribution by any savings they make in National Insurance (NI) as pension contributions do not attract employer or employee NI contributions.

If in any doubt about salary sacrifice do take personal financial advice.

Put it towards next year's big break

Why not save your lump-sum for next year’s holiday? You can usually secure a better deal the earlier you book, so perhaps now is the best time to start looking and booking!