Accessing pension early due to terminal illness

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-

Reply to
Bill
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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.

Reply to
Jonathan Bryce

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

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

tim

Reply to
tim

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.

Reply to
Jonathan Bryce

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

Reply to
Peter Saxton

In message , Bill writes

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.

Reply to
john boyle

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.

Reply to
Gareth Kitchener

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!

Reply to
John-Smith

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.

Reply to
Gareth Kitchener

"Jonathan Bryce" wrote

Fortunately, this time you're wrong!

Correct.

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.

"Jonathan Bryce" wrote

This does often happen as well as / instead of ill-health pensions.

"Jonathan Bryce" wrote

Actually, the IR *specifically* **do** allow ill-health retirement.

"Jonathan Bryce" wrote

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!

Reply to
Tim

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