transfer sensitive data to new imac

You are mistaken that iCloud is a backup, it is not, it is Apple's solution for sharing data across multiple devices that use the same Apple ID. Apple's backup solution for Macs is called Time Machine and is explained in Back up your Mac with Time Machine. If you want to migrate from another Mac to the new Mac, the most reliable and overall fastest solution is explained in Setup Assistant and Migration Assistant. Please follow that strategy and your migration will be very very easy.

Time Machine works fine in Catalina, you need to fix whatever problem you have with Time Machine prior to migrating! Otherwise your migration will be a mess. Please let us know the p problem you were experiencing with Time Machine so we can begin to troubleshoot it.

Yes, replace the Time Machine External Hard Disk with a new disk and make a fresh backup. All hard disks die, if your Time Machine drive was over 4-6 years old then that is what I'd suspect. If you are in the US please order a OWC Mercury Elite Pro and use that to create a new Backup for your older machine, then once that backup is created then you can migrate from the External Hard Disk to the new machine. Once your migration is done then simply use the new External Hard Disk you just bought for the Time Machine backup for the new machine!

WD is the Yugo of EHDs so that simply means your WD External Hard Disk has died. Please purchase a higher quality External Hard Disk. Because you are in the UK you have a lot to select from. If you cannot find an OWC Mercury Elite Pro (please try OWC Europe to find a reseller near you) then I'd suggest a LaCie drive. Many have had good luck with them, my personal preference is the OWC however I live in the US so getting them is easier. LaCie has good world wide availability, I'd start with Amazon!

My recommendation would be at least a 2 TB model. You will not need one with Firewire & Firewire 800 connections so just get one with a USB connection. As a general rule of thumb the capacity of a Time Machine drive should be 2x - 3x the capacity of the machine it is backing up.

For example, lets say the old Mac has a 1TB drive but you only have 600GB on it currently. Then your TM drive should (2 x 600GB = 1.2 TB). As there is no 1.2 TB option at least a 2 TB model is fine. Personally I have a 4TB model to give me more than enough capacity for my iMac's internal drive with about 1.12 TB of data on it.

You are confusing RAM with storage. Your Mac 8GB of RAM, to find out how much storage it has click the Apple symbol in the upper left and then click About this Mac and it will tell you the size of the internal storage and how much you are using.

As for the drive you are looking at please provide me with the web address of the one you are looking at and I'll navigate there and take a look.

It is always difficult to say for sure why a hard drive dies as there are so many factors including the quality of the enclosure, cooling, quality of the internal HD ect. When you mentioned you had a WD drive these are pretty well known to be fairly low quality enclosures that have little if any cooling vents. The enclosures tend to be glued together cheap plastic enclosures that keep heat inside. Because heat is know to be a big killer of electronics my guess is your drive to inadequate cooling.

The drive I suggested (OWC Mercury Elite Pro) is a high quality enclosure, when you receive yours you will see what I mean. An added bonus to the OWC enclosure is when the HD does eventually die, you can replace it yourself with just a screw driver in under 5 minutes. I have some of their enclosures that are 15 years old that still work perfectly today. The drives have died but replacing them is simple as mentioned. All HD's die as they have moving parts, like a car it is the moving parts (tires, brakes, valves, belts) that tend to wear out. With any HD it is not a matter of if it will die, its a matter of timing.

My recommendation is to return the iMac and buy one with at least 1 TB of SSD storage. If you bought the computer from Apple, then you have 14 days to return it for any reason. If you purchased from a reseller, you need to work within their sales policies. Going forward NEVER EVER buy a computer based on price, buy based on your needs. Long after the money is spent your thoughts are not on how much you paid but with the experience you are having with the device.

If for some reason you cannot return the machine you bought then you will have to migrate manually and buy external storage to save large libraries such as photos, music and movies onto.