Taking pension benefits in ill health
Any individual who has a life-altering illness would expect to have more hardship over their remaining years. This is where a financial adviser can assist concerning receipt of pension benefits before 55.
If a client were to fall ill prior to retirement and are unable to continue working, they may need to fall back on their savings and investments. Cash savings, Investment Portfolio’s and ISAs are all relatively straightforward to deal with and depending on the level of funds available may be enough to tide them over to pension age. However, if they have relatively little by the means of investments, a client’s pension may be accessible, but these come with some complex rules of which we will touch on below.
The earliest that members can access their pension age is 55 – unless you have a protected pension age. Another exception is when a member is in ill health and meets the following three conditions:
- The member is presently incapable of performing their occupation due to injury, sickness, or disease.
- The member must continue to be incapable of performing their occupation on an ongoing basis into the future.
- The member must have ceased to carry out their occupation.
The first two conditions are clearly based on opinions. This must be carried out and confirmed in evidence by a qualified medical practitioner, which the scheme administrator can further investigate.
The third point is a matter of fact, although different scheme administrators could approach this differently.
As you can see from the three different conditions, the word occupation is listed in each one, and it is this word that can have a bearing on whether the member can access their pension early. The first point to note is that it simply states ‘occupation’ rather than ‘any occupation’. Therefore, if the member carried out their work as a labourer in a workshop for example and their ill-health still allowed them to do office-based tasks they would possibly still meet the ill-health condition.
An alternative scenario is where a member has already left work and is looking to amalgamate their pensions into a more modern contract, this can cause problems as they won’t have had an occupation when the contract is set up.
Another example to be mindful of is when someone is reducing their hours or moving into a consultancy role in a similar occupation as to when they were full time, this may not meet the ill-health conditions.
Whilst listed above are some general circumstances and situations, the scheme administrator may have some stricter rules as to what qualifies for incapacity and therefore it is important to look at the scheme rules before any planning can take place.
This is a very niche area of financial planning, but we look, as always at the larger circumstances and help you achieve comfort knowing that we have all bases covered when creating a bespoke financial plan.
As no two situations are alike, we recommend having a no obligation initial chat with one of our Directors and Chartered Financial Planners – Grant Farnell or David Torkington to see if we can help.