If you can no longer work due to ill health you may be able to take your pension benefits early, this is known as taking an ill health pension. Depending on the rules of your pension scheme, this can apply to those under the age of 55.
Each pension scheme will have its own rules on what ill health or sickness means, but typically you will be considered for an ill health pension if you are unable to carry out your normal job due to physical or mental illness. In the instance that you are terminally ill and have less than a year to live, you may be able to take the whole of your pension pot as a lump sum and special tax treatment may apply.
Usually, when you reach pension age you can take 25% of your pension pot as a tax free lump sum and the remaining 75% would be taxable. However, if you are terminally ill you may be able to take all of your pension pot as a tax free lump sum, if all of the following apply to you:
- You are expected to live for less than a year due to ill health
- You’re under 75 years of age
- Your pension pot does not exceed the lifetime allowance amount of £1 million
The rules on special tax treatments will depend on the rules of your scheme, it is advisable to seek independent pension advice to clarify what your entitlements are and ensure you are taking the best course of action if you are considering taking an ill health pension.
If you are looking for independent pension advice in Manchester, we can help you find the right pension adviser to help you with all aspects of ill health pensions to ensure you have the most effective and efficient strategies in place.
Taking Ill Health Retirement
If you meet the criteria of your scheme for taking ill health retirement you may be able to take your pension benefits early. As you will be taking your pension benefits early, it is likely your pension pot will be less than expected if you had continued to work until retirement age, but if special tax treatments apply to your circumstances this could help reduce the effect on your pension amount.
Taking ill health retirement will be unavoidable and unplanned, while many will plan for their retirement not all will consider how ill health could affect their retirement or pension. Working with an independent financial adviser can help you plan for the unexpected before it is too late and they will be able to advise on the best strategies for protecting you and your family should ill health affect your circumstances.
The financial advisers we recommend are experienced in retirement planning and regularly work with their clients in Manchester to provide independent pension advice. Our financial advisers will work with you to determine how ill health retirement will affect your pension and advise on the best course of action.
At Pensionadvice.org we can help you find a FCA registered financial adviser for independent pension advice in Manchester. The financial advisers we recommend offer bespoke pension advice in Manchester that is tailored to your unique personal circumstances.