Accessing pension early due to terminal illness


B

Bill

Hi

Hopefully someone can shed light on this issue... I've been diagnosed
with terminal cancer and don't expect to live to anywhere near normal
retirement age (I'm 31 now). I've a mothballed Local Authority final
salary pension which I was paying into for about 4 years, and a 2 year
old stakeholders pension. (We're not talking about a vast amount of
money!) I'm about to stop paying into my stakeholders pension. My
question is can I access the money in my pensions now?

I've search all over the web but can't find any answers to this.
Loads of cashing in pensions when you get to 50 and the like, but
nothing about situations like mine.

I would ask my IFA but he's gone silent on me, so thought I'd do some
investigation on my own before finding another IFA who (hopefully) can
help me.

Thanks in advance for any replies...

cheers

-bill-
 
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J

Jonathan Bryce

Bill said:
Hopefully someone can shed light on this issue... I've been diagnosed
with terminal cancer and don't expect to live to anywhere near normal
retirement age (I'm 31 now). I've a mothballed Local Authority final
salary pension which I was paying into for about 4 years, and a 2 year
old stakeholders pension. (We're not talking about a vast amount of
money!) I'm about to stop paying into my stakeholders pension. My
question is can I access the money in my pensions now?
As far as I'm aware, you can't. The estate will get the money when you die,
but that's not much use to you now.
 
T

tim

Jonathan Bryce said:
As far as I'm aware, you can't.
I'm not entirely convinced that this is the case.

It seems that the process is known as Commutation and what I have
found so far it seems that it dependes on the rules of the scheme whether
it is allowed rather than any IR rules (which presumably therefore do
allow it). The schemes that I have found that do allow it all seem to be
Civil Service type schemes such as the one described here

http://www.suffolknut.org.uk/commute.htm

Perhaps the OP will have to ask his pension company whether a
Commutation is allowed and in what circumstances.

tim
 
J

Jonathan Bryce

tim said:
I'm not entirely convinced that this is the case.

It seems that the process is known as Commutation and what I have
found so far it seems that it dependes on the rules of the scheme whether
it is allowed rather than any IR rules (which presumably therefore do
allow it). The schemes that I have found that do allow it all seem to be
Civil Service type schemes such as the one described here
Some schemes might have insurance policies attached to them, and it would be
the insurance policy that pays out in the event of critical illness. I'm
pretty sure the Inland Revenue does not allow you to get your hands on the
scheme money before age 50, unless you work in certain occupations like the
military where you are expected to retire young.
 
P

Peter Saxton

Hi

Hopefully someone can shed light on this issue... I've been diagnosed
with terminal cancer and don't expect to live to anywhere near normal
retirement age (I'm 31 now). I've a mothballed Local Authority final
salary pension which I was paying into for about 4 years, and a 2 year
old stakeholders pension. (We're not talking about a vast amount of
money!) I'm about to stop paying into my stakeholders pension. My
question is can I access the money in my pensions now?

I've search all over the web but can't find any answers to this.
Loads of cashing in pensions when you get to 50 and the like, but
nothing about situations like mine.

I would ask my IFA but he's gone silent on me, so thought I'd do some
investigation on my own before finding another IFA who (hopefully) can
help me.

Thanks in advance for any replies...

cheers

-bill-
Phone the companies that administer the pensions. They should know
what their rules are!
 
J

john boyle

Bill said:
Hi

Hopefully someone can shed light on this issue... I've been diagnosed
with terminal cancer and don't expect to live to anywhere near normal
retirement age (I'm 31 now). I've a mothballed Local Authority final
salary pension which I was paying into for about 4 years, and a 2 year
old stakeholders pension. (We're not talking about a vast amount of
money!) I'm about to stop paying into my stakeholders pension. My
question is can I access the money in my pensions now?

I've search all over the web but can't find any answers to this.
Loads of cashing in pensions when you get to 50 and the like, but
nothing about situations like mine.

I would ask my IFA but he's gone silent on me, so thought I'd do some
investigation on my own before finding another IFA who (hopefully) can
help me.

Thanks in advance for any replies...
Are you still employed by the local authority?

Some occupational schemes offer 'early retirement on grounds of ill
health', which will give you the chance to commute some of the income
into a lump sum. It depends on scheme rules. So check your local
authority scheme pronto. At the same time check to see what happens when
you die, If you are married make sure they know. If you aren't then you
may be able to nominate somebody who may get something. Occupational
schemes are generally determined by their own rules so be sure to check
with them.

With regard to the stakeholder then I cant see much hope for you getting
any dosh but your estate will, if that is any help to you heirs. Sorry
to be so morbid. Have you written a will? Have you written an enduring
power of attorney? Do so if you havent.
 
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G

Gareth Kitchener

Bill said:
Hi

Hopefully someone can shed light on this issue... I've been diagnosed
with terminal cancer and don't expect to live to anywhere near normal
retirement age (I'm 31 now). I've a mothballed Local Authority final
salary pension which I was paying into for about 4 years, and a 2 year
old stakeholders pension. (We're not talking about a vast amount of
money!) I'm about to stop paying into my stakeholders pension. My
question is can I access the money in my pensions now?

I've search all over the web but can't find any answers to this.
Loads of cashing in pensions when you get to 50 and the like, but
nothing about situations like mine.

I would ask my IFA but he's gone silent on me, so thought I'd do some
investigation on my own before finding another IFA who (hopefully) can
help me.

Thanks in advance for any replies...

cheers

-bill-

The occupational scheme would be allowed to 'commute' the pension for
a cash sum under Inland Revenue rules. You need to check with the
scheme trustees as to whether the scheme rules allow this.

There is no such facility under personal pensions legislation so the
best you can hope for with the Stakeholder is to firstly convince the
scheme administrators that "ill health" retirement is appropriate (so
you can "retire" before age 50) and then find an insurer who will let
you buy an 'impaired life' annuity.
 
J

John-Smith

Gareth Kitchener said:
There is no such facility under personal pensions legislation so the
best you can hope for with the Stakeholder is to firstly convince the
scheme administrators that "ill health" retirement is appropriate (so
you can "retire" before age 50) and then find an insurer who will let
you buy an 'impaired life' annuity.
Is there a way to borrow a sum equivalent to the value of the fund at
the projected time of death (sorry!!), to be paid off on death when
the fund is returned to the estate?

The lender would want the pension fund assigned to him as security -
that's probably not possible. But the pension fund could be secured on
e.g. a house, and be written in trust so the money goes directly to
the lender, avoiding any IHT.

The problem is that this man could live way beyond his life expectancy
(many terminally ill people do) or even recover (it has been known).
Then he has to repay the money (which he has now spent!). This is of
course a problem if he draws out his pension fund directly - no
pension!
 
G

Gareth Kitchener

John-Smith said:
Is there a way to borrow a sum equivalent to the value of the fund at
the projected time of death (sorry!!), to be paid off on death when
the fund is returned to the estate?

The lender would want the pension fund assigned to him as security -
that's probably not possible. But the pension fund could be secured on
e.g. a house, and be written in trust so the money goes directly to
the lender, avoiding any IHT.

The problem is that this man could live way beyond his life expectancy
(many terminally ill people do) or even recover (it has been known).
Then he has to repay the money (which he has now spent!). This is of
course a problem if he draws out his pension fund directly - no
pension!
I think that would certainly be possible... I don't know whether any
lender actually offers loans on that basis though. You've pointed out
the possible pitfalls from the borrower's point of view. The lender
might also have issues... the main one being that it's not possible to
actually assign the pension policy to the lender. On death, the
repayment of the loan would be a debt on the estate. However, the
pension fund may be paid under trust to a dependant rather than to the
estate and that person may not be obliged to pay off the loan.
 
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T

Tim

As far as I'm aware, you can't.
Fortunately, this time you're wrong!
Err, not quite. Commutation is something different - this is when you are
entitled to a pension immediately, and instead of accepting the pension you
ask for it to be "commuted" to a lump sum -- eg instead of getting £1,000
per year for life, you might get (eg) a one-off £15,000 lump sum instead.
[You can do this with an "ill-health pension" as well, but do not need to.]

Exactly correct. The IR allow pensions to be paid out before age 50 only in
the following two cases:

1. In the case of ill-health;
2. Special occupations - eg deep-sea diver, professional footballer, etc
etc.

.... but each individual pension scheme may have different rules in their
"Trust Deed & Rules" on when it is allowed.

There are many, many private-sector schemes which also allow it.

Some schemes might have insurance policies attached to them, and it would be
the insurance policy that pays out in the event of critical illness.
This does often happen as well as / instead of ill-health pensions.


I'm
pretty sure the Inland Revenue does not allow you to get your hands on the
scheme money before age 50
Actually, the IR *specifically* **do** allow ill-health retirement.


... unless you work in certain occupations like the
military where you are expected to retire young.
Actually, "ill-health pensions" are probably the most common reason to
retire before age 50 - I have seen a number of "ill-health" retirements in
my time, but very rarely a retirement due to special occupation!
 

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