Perhaps you don’t want or need a tax free lump sum to spend on luxuries, or to repay debts, or to set up in business.

You may, however, wish to consider taking a tax free lump sum to invest otherwise than to your main pension scheme. Perhaps directly on the stock market or through collective investments such as unit trusts, investment bonds or investment trusts.

A number of people instructing The Pensions Office have told us they will be using the lump sum to provide the deposit on one or more buy-to-let properties which they feel represent very good value in the current depressed property market.

Others are investing the cash to help fund the purchase of business premises, again on the basis they feel prices are very cheap at present.

There are almost no restrictions on how the money may be used, but there is one very important exclusion which some clients and prospective clients attempt to by-pass: re-investing the tax free lump sum into the pension scheme to benefit from further tax relief. Even here, some enquirers already have sufficient free capital to make further investments to pension arrangements, even without the tax free lump sum released from the existing pension scheme. Subject to certain conditions being met, this will often be acceptable.

One client has used his lump sum cash to finance a promising small business dealing in selected antiques. Having the benefit of most of these antiques in his own home pending their sale, he sees this use of part of his pension fund as a legitimate reward for his hard work and thrifty attitude over the last couple or decades.