What to do with the money?

[Muddle2000]

We have option to downsize but what the hell do we do with the money
as we will need every penny for retirement. ??

Depends how much money and how long you have til retirement, IMo. You might want to take some independent financial advice. But in general put it into your pensions (workplace and/or private), max out ISA allowances and/or put it into an index linked funded would be what I'm thinking...

You need proper advice from someone who looks at all of your finances and goals. If you juggle it about a bit I think you can pay it into a pension and immediately bump it up substantially by reclaiming income tax you've already paid from the last (three?) years. But talk to someone who actually knows!

We downsized a year before I retired. We used some of the equity to remodel the house we bought so that it will not need anything major spending on it hopefully until we die! The rest went in a 5 year account. We don’t need it yet.

@OpheliaThrupps

You need proper advice from someone who looks at all of your finances and goals. If you juggle it about a bit I think you can pay it into a pension and immediately bump it up substantially by reclaiming income tax you've already paid from the last (three?) years. But talk to someone who actually knows!

It is 3 years, and it can be a good bump to your pension savings. But keep in mind that however much tax you’ve already paid in those 3 years (20-21, 19-20, 18-19) the maximum you can pay in is your gross salary in the current year (21-22). It doesn’t sound like OP is a high earner, so sounds like this option wouldn’t account for all the money made from downsizing. Of course, it’s not long until 22-23 starts, so a chance to pay in enough for best tax optimisation in that year too. Impossible to say without details. It might be the best option to stick it in premium bonds and drip feed annual sums into pension in 22, 23, 24 - as all 3 years can be achieved in 1 years and 2 days.