David is 56 and he has been made redundant for the second time in five years after an American firm bought out his employers. His career has been successful but he has noticed that times are changing and he does not believe he will gain employment at the same level again.

He works in public relations, can work on a freelance basis, and knows he will make more than enough money to live on after the first twelve months

His two pension funds from previous employment when combined are worth in excess of £600,000. He has a small redundancy payment but not enough to last more than six months if the expenses of working on a freelance basis are taken into account.

He has other investments including £60,000 of stock market shares, which he might have to sell to provide income in the next two years but it is not really an opportune time to sell them as the markets are fairly volatile and he is concerned they might fall.

He is also concerned that if he sells his investments he will have a Capital Gains Tax to pay and he cannot see why the Government should profit just because he is trying to raise funds to earn a living.

He speaks to his independent financial adviser who suggests that consolidation of his two existing pension schemes in to a SIPP might provide a solution.

The £600,000 pension funds are transferred to a Montpelier SIPP. The IFA says that David can phase in the retirement benefits. David can choose to take a lump sum of up to £150,000 (25% of the total fund)

He chooses to use £240,000 of his total Montpelier SIPP which provides him with a 25% pension commencement lump sum of £60,000, tax-free. David does not need to take a pension income from the remaining £180,000, which is left to grow along with the remaining SIPP fund of £360,000.

The IFA also suggests to David that once his earnings grow he might want to contribute the £60,000 shares as an in specie contribution to the SIPP which means he will get tax relief at up to 40% without having to raise liquid capital to make the contribution.