£1,000,000 now or £10,000/month for 10 years?

dLockers said:
This question only makes sense in the US where lottery winnings of this kind are taxed if taken in a one-off rather than drawn-down upon over a long period of time.
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And tbf it's actually a good idea. Majority of people couldn't be trusted with vasts sums of money. Going on one hell of a bender and then waking up bankrupt.

Is the 10k a month fixed for 10 years, or would that increase with inflation? Would you not also receive interest on the remaining balance to be paid out?
 
Million upfront just so I can take it out in cash and...

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Depends tbh...who is responsible for the monthly payments? Is it going to be invested in some safe, fixed income annuity? Also, can you sell it?

I mean technically, unlike in other situations like this (see US lotteries where taking the lump sum is often a no-brainer) the yearly payments are worth more here... interest rates are low, gilt yields are like 0.79% for the 10 year. £120k a year 10 years into the future is basically worth something like £1.15 Million.

If it's an annuity and you can sell it then meh... something is wrong, your annuity is worth more than the lump sum you might want to take it and flog it for some amount between £1million and whatever it is theoretically worth - like say £1.15 million.

If you can't sell it then you're kind of locked in, if you were old and due to invest in bonds anyway them meh, you're still getting a prize worth more (given current rates) if you take the yearly payments.

On the other hand, if the payments are the responsibility of some company running a promotion then LOL... very different assumptions apply then, will they even exist in 10 years time? Take the lump sum and you can expose it yourself to that sort of risk and with better returns on offer.
 
Semple said:
Is the 10k a month fixed for 10 years, or would that increase with inflation? Would you not also receive interest on the remaining balance to be paid out?
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£10k is fixed so does not change with inflation, and no you wouldn't get any interest on the remaining amount that the promoter is holding.
 
1m now. I'm alright with money and literally would buy property and leave the rest for easy life while continuing to work and earn as I am now.
 
Mucky_Pup said:
Except my wife, I wouldn't tell anyone if I won £1 million.
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The sad thing is in this era, I'm not sure if most people's friends/neighbours would even notice if you were suddenly 1 million up.

It's not like you'll suddenly be moving into a mansion and have purchased three supercars.

A million for most would likely end up paying off a mortgage / moving into a slightly bigger house. A couple of luxury holidays for the family, and then a flashy but not ridiculously expensive car.
 
Semple said:
The sad thing is in this era, I'm not sure if most people's friends/neighbours would even notice if you were suddenly 1 million up.

It's not like you'll suddenly be moving into a mansion and have purchased three supercars.

A million for most would likely end up paying off a mortgage / moving into a slightly bigger house. A couple of luxury holidays for the family, and then a flashy but not ridiculously expensive car.
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If you live in London you could probably blow it all on buying somewhere to park your car.
 
SexyGreyFox said:
So OCUK, we have some money experts on here, £1,000,000 now or £10,000/month for 10 years and why?
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TLDR: both are actually about equal.

£10k per month is £120,000 per year or £1.2M after 10 years. £1M immediately is £1M.

However, that £1M has an earning potential. If invested prudently it should increase by around 5% each year and if you don't touch it your £1M will become £1.63M in a decade. Sauce for the goose is sauce for the gander and that £10k per month will also increase but the fund doesn't have such a head start. I can't be bothered to work out the full calculation but an approximation goes like this: (120,000 x (1.05^9)) + (120,000 x (1.05^8)) + (120,000 x (1.05^7)) + ... or (120,000 x (1.05^9 + 1.05^8 + 1.05^7 +...) which is a geometric series and gives a result of £1.51M. You lose the first year because you didn't have the full £120k. If you allow a monthly interest rate, a 5% return is (1.05^(1/12)) or 0.41% per month. The full calculation seems to break Windows Calculator but our series becomes much closer to the £1.63M.

Both calculations, however, assume you don't touch the money, don't pay any tax on it, etc etc. Reality is more complex and having the full £1M straight off gives you far more flexibility, like paying off your mortgage, car loan, and so on.
 
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