Income drawdown could give the option to reduce (or turn off altogether) the level of income drawn if the client starts earning again in future. The possibility of an improvement in health in future, with a return to working - perhaps in a different occupation - should be considered. If an annuity is to be purchased, better rates may be available through providers offering 'impaired life' or 'enhanced' annuities. Money purchase schemesĪll the normal options can be used to provide benefits on ill-health, subject to what the scheme allows - e.g. tax free cash plus flexi-access drawdown or annuity, an uncrystallised funds pension lump sum (UFPLS), or perhaps taken under the small (stranded) pots rules. It may also be possible to phase benefits. This could make replacing the lost earnings, and providing a long-lasting secure income stream, their top priority. While some clients may need that initial cash injection, others may face a significant period of recovery or the possibility of never returning to work. reduce or clear debts (credit cards, loans etc).pay any costs incurred from medical treatment or from making home alterations.The worse a client’s state of health, the more focus they could have on needing a lump sum. Taking benefits in ill-healthĭepending on the scheme rules, benefits may be taken in the same way as someone retiring on or after the normal minimum pension age. This could, for example, take the form of a letter or medical report from the individual's doctor that states the nature of the illness and their inability to work.įor an individual to qualify for serious ill-health benefits, the scheme administrator must have written evidence from a registered medical practitioner that the individual's life expectancy is less than one year. Medical evidenceīefore paying benefits on ill-health grounds, the scheme administrator must have medical evidence that the individual is (and will continue to be) incapable of carrying out their occupation because of physical or mental impairment and has actually stopped working. Potentially a scheme could, for example, only accept claims for specifically listed illnesses, or require that an individual is unable to carry out any occupation, not just their own. Serious ill-health - Where an individual has a life expectancy of less than 12 monthsĪlthough the law allows this, pension scheme rules might not permit early retirement based on these definitions - they can set their own criteria.Ill-health - Where an individual is unable to continue doing their job for health reasons.HMRC recognises two situations where benefits may be taken early on health grounds. Individuals unable to work due to a physical or mental medical condition can usually access their pension savings at any age. Ill-health benefits and the annual allowance.Ill-health benefits and the lifetime allowance.Jump to the following sections of this guide: Accessing pension benefits could impact on State benefits.Medical evidence is needed for ill-health claims.If the member's life expectancy is less than a year, the benefits can sometimes be taken as a tax free lump.The ill-health rules allow access to pension benefits at any age.
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