Pensions

[catherinewales]

My DH has a terminal illness. He's 45 and I've just been reading he can have his pension now. Either all, a lump sum or monthly payments. He's been given 9-12 months. Could he do this even though he is still getting paid by his employer and making pension contributions? Will he have to pay tax on it? Then my next question would be, would it just be best to leave it and I'll get the payout when he passes but would that be tax free? I'm thinking if he took it now he could benefit from it. He's worked hard for it so he should have some fun with it now. He's already a higher tax payer so asking about tax because it'd be pointless if he'd have to pay a lot of tax on what he would take out. For reference the pension is around £100k if that makes a difference.

Call his pension provider. If he has less than 12 months to live he can get a payout BUT you should also ask for the transfer value as transferring to burger scheme (from which you can draw down) may give you a bigger amount.

Thank you. I'll get him to call this week. I just don't know what to do for the best but I think he should try and enjoy it while he is well.

I am sorry for you.

If it is a DC pension, the whole fund should tax-free to his nominated beneficiary.

Please check with the scheme provider as some old types may not offer flexibility.

. Remember to consider your own family situation when he passes on. In pension terms £100000 is not a lot of money.

I found pensionwise useful to make decisions. It is provided by the government and they will talk you through your options.

https://www.moneyhelper.org.uk/en/pensions-and-retirement/pension-wise

Have he got any critical illness cover? And/or life assurance that may pay out early on this diagnosis. Both could be better options than using up the pension funds.

Sorry to hear this. If you contact MacMillan Support they have specialists who can help you with all things work related. They will hand hold you through it all. Open 7 days a week until 8pm. X

https://www.macmillan.org.uk/cancer-information-and-support/get-help/macmillan-support-line

There is also a MacMillan Grant you can qualify for (means tested).

Let MacMillan take some of the stress off you. They are incredible and have so many specialist teams working for them. Also, if there is a Maggie’s centre near you they are a fantastic support and can sign post you for counselling/financial support etc. xx

https://www.maggies.org/our-centres/

Thank you so much for all the information. He has a payout from work that will more then cover what we need when it happens. I want him to live now and make as many memories as we can. We've got 2 kids 8 and 12 they need memories more then we need the pension money xx

Refer to the pension scheme rules, contact the administrator.
It may be possible to crystallise part of the pension, so that tax free cash lump sum is taken out and what remains goes into a drawdown part of the pension (which on his death could then be used by you/beneficiaries).

Make sure the Expression Of Wishes is put to date, so the pension provider knows who would receive the pension. Have a Will.

What would the money be used for? Have a plan, so it helps you spend quality time together.

Serious ill-health lump sum.

It may be possible to take all the money tax free.

Talk to the pension scheme administrators. If he is still able to work, he may not qualify for the ill-health lump sum, even with the terminal diagnosis. Need to check the pension scheme rules.

Sorry to hear this OP :(
Definitely schedule a call either the pension provider to discuss options on taking it early due to circumstsnce & any tax that would be due.

If its a DC pot, as said, it will be paid to the nominated beneficiary upon death, & this is outside normal inheritance/inheritance tax etc. Not many people seem to realise this; most people aren't even asked about it when taking out a life insurance policy, but it obviously forms a key criteria in how much coverage somebody would want/need.

Just to make some memeories. He's off work sick but he does want to go back. Although we've been given a terminal diagnosis he's really well so it's given us false hope. We can't go abroad but we want to give the kids some holidays in the uk so they can have lots of memories xx

Thank you everyone. We are going to speak to them next week. Hes got chemo tomorrow so leaving it till the week after when he's on his well week to phone them.

Sounds like a great idea to use it to make memories.

Remember there are 2 main (& other) types of pension.

It is necessary to know what type of pension. At 45 it will only be a DC pot (almost certainly) unless your DH is a civil servant/teacher/doctor ie works for the government.

Assuming this is a DC pot. If you have less than 12 months to live (stated by a consultant), then the whole pension pot can be paid out tax free to the member.

If it is a funded DB pot you may be better off to transfer the pot so 100% can go to the member tax free.

For an unfunded DB - refer to the scheme rules but usually the kids and OP will receive a pension.

Thank you, that is really helpful information. I've been reading a lot on this and it seems he would have to be medically retired to get it? Do you know if I'm reading that right? Also it's not a government pension.

No that's not the case he doesn't need to be medically retired, I'm afraid he needs to have a life expectancy less than 1 year. If this is a DC pension (the sort you put money in and that is the value of it, depending on investment returns). It's called a serious ill health lump sum.

Now whether he could take the money and continue to save into one is another matter. That said I would speak to HR, tell them that his intention is to take his pension pot (NOT a pension), then ask to be paid the money that would have gone into a pension in his salary. Maybe not as tax efficient but I'd not worry at this stage.

If he takes the money now, or you take it after he dies (sorry that's a brutal statement), both scenarios are tax free.

Is it with one of the big insurance companies e.g Aviva, Aegon, Scottish Widows? They will be very used to this sort of claim. You need to ask them for the forms, usually you need to submit medical evidence such as a report from the consultant.

You've got to be on means tested benefits to qualify for three grant. I was on contribution based esa rather than income based because I'd always worked so was refused the grant.

If he sadly has less than 12 months life expectancy it should be possible to take the entire pension scheme benefit as a "Serious Ill Health Lump Sum". I don't think he will be able to continue to have pension contributions made into though once that is done. As others have said that may not maximise the value of the pension pot, but if your main priority is him having money to have the best remaining time possible with your children then that may not be an issue.

That is amazingly helpful, thank you. Unfortunately his HR have been awful. They've not been answering his emails but he's managed to speak with his manager and he is chasing it up. I'm sure his pension is with Aviva. His consultant has told him he has 4-6 months without treatment, 9-12 with treatment but possibly 14-18 months depending on how he reacts to it. It's absolutely rubbish news and we are heartbroken but the money would give us enough to make as many memories as possible as his pay drops this month and I'm going back to work but only 2 days.

Thank you that's really helpful