When playing professional rugby, your salary likely makes up a notable portion of your regular income. However, you may also receive additional funds from match win fees or bonuses for reaching quarter-finals or semi-finals. If you have sponsorship deals, you could see regular lump sums from these, too.
Depending on the level you play at, these extra bonuses could be significant. For example, recent estimates from Huge Rugby show that you earn around £25,000 a match playing for England.
While you might not play at an international level and earn these sums, the bonuses, win fees, and sponsorship payments you see throughout your career still add up. It is important to consider how you use these funds, so you can improve your overall financial position.
Here are five ways you could potentially use a lump sum.
1. Boost your emergency fund
It is beneficial to keep aside some cash savings so you can pay for any unexpected bills or expenses without relying on credit cards and loans. You may also use your cash savings to fund your lifestyle for a period after you finish playing and work to establish a second career.
Generally, it is advised that you keep enough to pay your expenses for three to six months in your emergency fund, and it is important to top it up regularly.
As the cost of living increases, your cash savings will not go as far as they once did. Also, you might spend a portion of your savings if you need to make home repairs or pay a large bill. So, if you receive a bonus, you might use it to increase your emergency fund and ensure you are prepared for financial shocks.
2. Clear expensive debts
Expensive debts such as credit cards can significantly diminish your monthly income. You could pay large amounts of interest, so clearing these debts as quickly as possible may be a priority.
If you receive a windfall, you might consider using it to clear outstanding debts immediately. While this may not feel like a satisfying way to use the funds in the short term, you free up additional income each month.
This means you could improve your quality of life now and contribute more to savings and investments for the future, strengthening your overall financial position.
3. Invest for the future
You may use a lump sum to achieve short-term aims such as increasing your emergency fund or paying off credit card debts. After you have taken care of these fundamentals, you might look to the future.
As a professional rugby player, you have a unique relationship to work and retirement. Your playing career will not last forever, and you will likely transition to a second career. During this time, your income could fluctuate and may fall for a period.
That is why it is important to build wealth while you are earning a regular income from playing, so you can still fund your lifestyle after you hang up your boots. Investing is one way to achieve this.
While past performance does not guarantee future returns, you will typically see greater growth from investing than you would if you simply held a large sum in cash savings.
We can help you invest a bonus, so you can create a financial buffer to draw from later once your playing career ends.
4. Contribute to your pension
As well as considering your retirement from rugby, you may need to plan for your second retirement, when you stop working altogether.
Your pension is one of the most effective ways to save for this because you benefit from tax relief from the government whenever you contribute. The provider also invests the funds on your behalf, so your pot should grow over the years.
Crucially, you cannot access your pensions until age 55 (rising to 57 from April 2028, unless you have a protected lower pension age), so even if you are tempted to, you will not be able to spend your savings prematurely.
Your contributions may vary throughout your life, especially as you transition away from professional rugby and your earnings change. While you are receiving large bonuses and win fees, it may be beneficial to put some of this wealth into your pension.
The earlier you pay in, the more time you give your savings to grow, so contributing a windfall to your pension during your playing career could significantly improve your quality of life in retirement.
5. Overpay your mortgage
If you are comfortable with the level of wealth you are saving and investing, you might use additional funds to overpay your mortgage.
This could benefit you in two ways: you can clear the debt faster and you will also reduce the overall amount of interest you pay.
You could overpay each month or pay a one-off lump sum towards the debt.
The NatWest mortgage calculator shows how much you could save if you had a £250,000 loan with a 4% interest rate and 30-year term. A single £5,000 lump sum overpayment would mean you pay the mortgage off one year and one month earlier and save £11,222 in interest.
Reducing your mortgage earlier in life could also mean you have access to better deals with lower monthly repayments when you remortgage. Lowering one of your largest expenses in this way could make it easier to maintain financial stability as you transition into a second career later.
Bear in mind that many lenders limit the amount you can overpay each year and may charge early repayment fees (ERFs). It is important to check when ERFs apply to ensure that overpaying will benefit you.
Get in touch
We can help you decide on the most suitable way to use a windfall from bonuses or win fees.
Email enquiries@dbl-am.com or call 01625 529 499 to speak to us today.
Please note
This article is for general information only and does not constitute advice. The information is aimed at individuals only.
All information is correct at the time of writing and is subject to change in the future.
A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available.
The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts.
The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.
Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.
Your home may be repossessed if you do not keep up repayments on a mortgage or other loans secured on it.