‘I’ve never had this much money in my life – can my windfall pay for both retirement and some fun?’

Dear Paulette,

Leaving aside the difficulties you have shared in relation to financial arrangements with partners past and present, you seem to have an excellent handle on your personal financial situation and, if I may say, a lovely vision for how you want to spend your retirement. I think it’s all within reach.

The spending and wishes you have set out appear to be roughly 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. The couple amounts per person are lower for each living standard, but from what you say about you and your husband not really sharing finances, it might be best to use the estimates for a single person in your case. 

You mention credit card repayments of £250 a month. I don’t know if this pays off the card in full or if there is an outstanding balance – if there is an outstanding balance, you should certainly consider paying it off in full with some of the inheritance money.

If you wish to maintain the £1,500 a month income for the next two years once you’ve retired and before you reach your state pension, and this can include the amount you receive from your ex-husband’s pension, then roughly speaking, you’d be taking a total of about £24,000 from your inheritance in the next two years. 

In order to access this monthly income, you would have a few options. For example, £20,000 of that £24,000 could go in a top-paying cash Isa (the annual ISA 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.

Bear in mind that the interest on whatever inheritance money you store in savings accounts 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 currently up to 5.15pc, which is better than they have been for many years. So, as a risk-averse person, 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.

It’s always important to consider the £85,000 FSCS compensation limit per institution, per account when choosing how much to deposit and where. It’s also very important with savings accounts and cash Isas that you could potentially be using for years 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. Income that you take from any kind of Isa will be tax-free, helping you to keep your tax bill lower when you do also start to take income from your state and private pensions. 

As you suggest, you could also look at fixed-rate bonds. However the best rates over a three-year term aren’t any better than 5pc, and interest is potentially taxable. 

Another option worth considering for potentially higher returns could be adding some of the money to your pension. This way, you would benefit from tax relief on the contribution up to the annual allowance – a 25pc uplift on what you put in as a basic-rate taxpayer. The annual allowance for contributions is £60,000 but you can only receive tax relief on contributions up to your maximum earnings. 

Do remember, though, that once you have started accessing your private pensions and the 25pc tax-free lump sum is used up, then unlike money coming out of an Isa, money coming out of a pension is taxable. It’s also worth knowing that once you start drawing an income from a pension, the annual allowance is reduced to £10,000 a year – the “Money Purchase Annual Allowance” – limiting your ability to put more in. 

It might be worth reconsidering whether you take that lump sum from your council pension. It sounds like you would take £6,000 initially, but then lose £2,000 a year in income. You would only need to survive three or four years to be in a net better position with the income option.  

Once you reach state pension age, you will get your own state pension, which could be around £12,000 a year in two years’ time, assuming you have the maximum number of qualifying years (if you don’t, it might be worth considering buying more years). 

Then, you’ll have £4,000 (or £6,000 if you choose not to take the lump sum) a year income from your own old council pension, combined with £6,000 from your ex-husband’s pension and £270 from your Nest pension, plus anything you wish to take from your remaining inheritance, which should give you an extra £3,000 a year and if generating decent returns, possibly more.

This would get you to the PLSA moderate living standard quite comfortably. Hopefully enough to ensure you can enjoy those holidays and test matches. 

Write to Pensions Doctor with your pension problem: pensionsdoctor@telegraph.co.uk. Columns are published weekly