If you have or have had cancer, you may be able to retire and claim your pension early because of ill health. Your illness usually has to be permanent and stopping you from working. It depends on the rules of your pension scheme.
If you have a defined benefit scheme and claim your pension early due to ill health, it may give you less money. This is because there is less time for the pot of money to grow. Some schemes give you the same money, and others could pay more. This depends on the rules of the scheme.
If you qualify for ill-health early retirement, your pension scheme will tell you what your options are. You should also speak to an independent pensions adviser such as a Macmillan financial guide before you decide.
Life expectancy of less than 12 months
If you have a life expectancy of less than 12 months, you may be able to take serious ill-health retirement. You will usually get the whole of your pension as a one-off lump sum.
Things to think about
- If you are aged under 75, the whole sum is usually tax-free. In this case, a registered medical professional must give evidence to the scheme administrator that your life expectancy is less than 12 months.
- If you are aged 75 or over, 25% of the lump sum is tax-free and the rest is taxed as income.
- Taking a lump sum could affect any means-tested benefits you are getting.
- If you choose to take serious ill-health retirement, you might use all of the money you have saved. This means there would be no benefits payable to your beneficiaries after you die. This depends on the rules of the scheme.
- Before choosing to take serious ill-health retirement, check the death benefits payable to your beneficiaries if you were to die before taking your pension. For example, if you die while employed, your pension scheme may pay out a lump sum called death-in-service. You should speak to a financial guide to make sure you choose the best option for you and for people who are financially dependent on you. Call 0808 808 00 00 to speak to a Macmillan financial guide for free.
- Any money you take from your pension, but do not spend or give away before you die, becomes part of your estate. Your estate is the money, possessions and property you leave behind. We have more information about passing on your pension benefits.