terminal illness and pensions

meursaultFTL

anyone know if and how i can claim back money paid into a private pension back in the 90's when at a former employer?

technically 'terminal' with stage IV melanoma but still able to work normally at present

thanks

xylophone

anyone know if and how i can claim back money paid into a private pension back in the 90's when at a former employer?

Do you have a deferred pension? If so, you should contact the administrator.

Is this a pension policy? If so, contact the insurer.

atush

Get out your details, and call them. If you are terminal in t he sense of 12 months or there about, you can claim now.

If you are 55 and this is a DC scheme, you can claim now.

If it is a DB pension (ie final salary type) you may be able to claim now (depending on diagnosis) but the fact that you are still working may mean no. Check your scheme rules.

Not really enough info from you to go further.

jamesd

What happens depends on the type of private pension. If it was a personal pension or a work pension where there are investments that could be changed by you or a personal pot of money then it is likely to be possible to take the whole pension pot as a tax free lump sum when your doctor is prepared to say that you have a life expectancy of a year or less.

If it was a defined benefit pension like final salary or career average salary there would not usually be a way to get it all as a lump sum directly from this type of pension. However there can be exceptions and you should ask. If there is not an exception then this is one of the situations where a transfer out of a defined benefit pension into a personal pension is appropriate. After the transfer you'd get the same 100% tax free lump sum option. You would normally need to pay an IFA to approve such a transfer though this situation is so obvious that the place you're transferring to may waive this requirement when they see the letter from your doctor about your life expectancy. Ask, and perhaps pick a place that will to avoid the potentially avoidable IFA cost.

So first step is to find out more about the exact type of pension and ask about their procedures for a "serious ill health lump sum" for a person with a diagnosis of "one year or less to live", or tell them that your doctors do not yet think you meet that criteria but you have been told that it will be fatal and want to be prepared for when your doctor is willing to say one year or less. Be sure to mention both parts I've put in quotes, it should make it very clear what the basis for them making the payment will be and should avoid them telling you that you can't have it as a lump sum, which is the normal situation for people without a fatal illness.

Your doctor does not have to be perfect in predicting how long you will live, it's expected that some people will live longer and some shorter times even after a doctor has said that one year or less is likely.

You do not need to be 55 years or older to get a serious ill health lump sum, it's available at any age provided you meet the life expectancy condition. If you do not yet meet the one year life expectancy requirement, your age matters. If you are 55 or older you can currently get 25% of the pension pot as a tax free lump sum. The remaining 75% cannot be taken as a lump sum under current rules, though about 6% could be taken as a taxable lump sum each year. There is a proposal to change this to allowing it all to be taken as a taxable lump sum and this is expected to become possible from April2015.

There is one key detail to notice about the over 55 option: once you use that you cannot take the tax free serious ill health lump sum rule to get it all tax free. You can only use that rule if you've taken nothing out of the pension. So sometimes it can be better to wait for your life expectancy to drop until you can get it all tax free.

Since you are still working and if you expect to have a one year or less life expectancy, as you do, then you might also consider whether it is of value to you to make more pension contributions. You would get the tax relief on the way into the pension then get it all out as a tax free lump sum when you qualify for the serious ill health lump sum. There is currently a limit of £40,000 or your earned income each tax year for pension contributions. If your earned income in the tax year is higher than that then, if you have been a member of a pension scheme for the years, you can use up unused parts of the allowance from the previous three years.