Help with pension options and terminally ill parent

Dazza

Hi all,

I was wondering if anyone could help with a question relating to my mother in laws terminal illness diagnosis and her pension. Unfortunately after battling breast cancer for the last 3 years my mil was told last month there is nothing more the doctors can offer and that she doesn't have long left to live. She has been very brave about the whole thing but she hasn't talked about anything regarding finances or work (she hasn't even told them the extent of her cancer, apart from what goes on her sick lines).

She has worked for the same organisation for around 35 years (on low income job) and paid into their pension scheme and although she is still an employee she hasn't been in work since she started treatment 3 years ago, and hasn't had a wage from them since 2.5 years ago. She has been getting ESA and DLA. Our concern is that she seems to think there is a life insurance policy built into her pension and that when she dies my wife would get that, but does she not have to be paying into the scheme still as an active member for this to be the case? Would she be better asking her work to cash in her pension fully before her death? I really hate asking these questions but any help would be appreciated.

Shimrod

Do you know what type of pension scheme it is -final salary or defined contribution? If it is a final salary pension scheme then the life assurance will probably be covered by the pension rules. I think it will come down to whether your MIL has still been classed as in pensionable service even though she has not been paid by the company.
A company may also offer enhanced life assurance when you are a member of the pension scheme (e.g. 3x salary) but still offer 2x salary to employees even if they are not in the pension scheme. It is possible that this insurance option may be available -this would be determined by your MILs terms and conditions of employment as well as pension rules (if a final salary pension).
I'm afraid your MIL will probably have to contact both the company and pension trustees to confirm what benefits will be available - she may be able to get an immediate payment from the pension scheme which may help make her remaining time a bit more comfortable.

You have my sympathies at this difficult time.

Dazza

Shimrod wrote: »

Do you know what type of pension scheme it is -final salary or defined contribution? If it is a final salary pension scheme then the life assurance will probably be covered by the pension rules. I think it will come down to whether your MIL has still been classed as in pensionable service even though she has not been paid by the company.
A company may also offer enhanced life assurance when you are a member of the pension scheme (e.g. 3x salary) but still offer 2x salary to employees even if they are not in the pension scheme. It is possible that this insurance option may be available -this would be determined by your MILs terms and conditions of employment as well as pension rules (if a final salary pension).
I'm afraid your MIL will probably have to contact both the company and pension trustees to confirm what benefits will be available - she may be able to get an immediate payment from the pension scheme which may help make her remaining time a bit more comfortable.

You have my sympathies at this difficult time.

Many thanks for the response. We have no idea if is final salary or defined , and as I said she hasn't been very forthcoming talking about it. Could she still be classed as an active member even though she hasn't paid any contributions into the scheme for the last two plus years? I am presuming she is still classed as an employee as her work have never paid her off.

Shimrod

I can only tell you what would happen based on the rules of my (final salary) pension fund - hers could be different. Mine clearly states that death in service benefits will be paid out at 2x salary, or 3x salary if accuring pension benefits. As you say she has not been paid for the last 2.5 yrs, then she cannot be accruing pension benefits and therefore your wife would get the 2x benefits. Also bear in mind that with a final salary pension, the benefits are held in trust so the trustees would have final say in who gets the benefits. When your MIL joined the scheme she would have completed a nomination of benefits - she may want to update this.

If the pension is a defined contribution pension, then it is much simpler. The company may or may not offer the death in service benefit, but the benefit of the pension scheme is effectively the accrued funds. If she has been paying into a pension for 35yrs, I would guess it is more likely to be a final salary scheme.