Starting pension with lump sum

doveman

If a medically-retired 47 year old was to receive a lump sum of around £30,000, would it make any sense to start a pension with it in the hope that he could add to it in future, from further lump sums he might receive or from any spare money he might have at the end of the month?

If it subsequently transpired that he was not going to be able to put in enough to produce a worthwhile retirement income, would he be able to withdraw the funds and how much would he lose doing that?

AnotherJoe

Where did this lump sum come from? If the retired person isn't earning the most they can put in each year is £2,880. Or did it come from redundancy or a final payment?

You cannot get money out of a pension until you are 55.
At that point, if there is no other income it can be taken out each year without paying tax as long as you take under the tax threshhold plus 25%.

doveman

OK, thanks. He's not certain he'll receive anything yet but if he does it will be damages. He's not earning though, so that rules out investing it in a pension.

Out of interest, on the point about being able to take out an amount that's under the tax threshold plus 25% tax-free if there's no other income, would that include any benefits? If someone is in receipt of benefits, does that prevent them taking anything out from their pension or does it just reduce the amount they can take out by the amount they receive in benefits?

AnotherJoe

Benefits dont affect what you can take out of a pension tax free or otherwise.

A pension may affect what benefits you can get.

Ask on the benefits forum, being very specific about the benefits