Terminal illness/pension

stewie1098

Difficult and sensitive one this. Partner has terminal illness, currently on sick leave (8months) on LGPS. Has 30 + years pension contributions. Currently on 1/2 pay and is over 55. Thinking of future is is best to remain on sick even after receiving no salary ? should we take max. lump sum when sick pay runs out ? or minimum and maximum monthly pension ? thoughts/ideas. Thanks- and sorry about nature of post.

Lungboy

The lump sum question will be down to life expectancy. If they aren't likely to live long then the lump might be better. You'll need to work out how long they'd need to live for to make the bigger pension financially advantageous and see if that's a realistic outcome. Ongoing pension for you will need to be factored in if there is one. Also you say partner, you might need to look into your rights if you aren't married.

A_Nice_Englishman

I'm sorry to hear of your partner's illness. I hope his/her remaining life is as happy and comfortable as possible.

In case you haven't seen it already here's a link to the relevant section if the LGPS website.
https://www.lgpsmember.org/tol/thinking-leaving-illhealth.php

And the section on what happens if a member dies after commencement of their pension
https://www.lgpsmember.org/arl/already-left-prot.php

It's important to ensure you receive any lump sum and survivor pensions after your partner's death so he/she must contact the employer and pension administrator and ensure all paperwork is in order.

Brynsam

Horrible situation; I am sorry.

If your partner's life expectancy is less than a year, and the pension has not come into payment, it may be worth considering transferring out to a personal pension. Your partner will then be able to take the whole amount as a tax free lump sum on the grounds of serious ill health (the LGPS doesn't offer a 'full commutation' option, as it is called).

You refer to 'partner'. If you are not married or in a civil partnership, there could be an IHT issue if you go this route.

Worth a chat with TPAS for free, impartial help to understand the issues/options: https://www.pensionsadvisoryservice.org.uk

Apologies for the cold commerciality of this reply; it always feels especially awful putting this sort of thing in writing on a public forum.

Silvertabby

I'm so sorry.

Has he nominated you to receive his spouse's pension benefits (in addition to the lump sum) - and is he eligible to do so? By eligible, I mean that neither of you are married to someone else, and that you have been living together as husband and wife for at least 2 years and are financially interdependant.

Is he going down the (LGPS) ill health retirement route? If not, then it is something that he should perhaps be looking at - with the help of his HR department.

It's complex, and I'm happy for you to PM me if it helps, but if he is awarded Tier 1 ill health retirement then his 30 year pension will be enhanced with the number of years between retirement and his State pension age.

He will then be offered the choice of either the standard tax free lump sum and pension, or a higher tax free lump sum and smaller pension. The spouse's pension would be the same regardless of which option he chose.

Then, on death, there would be a further tax free lump sum (the death grant) payable to his nominated beneficiary. This is 10 x the pension in payment minus pension already paid.

If your partner's life expectancy is less than a year, and the pension has not come into payment, it may be worth considering transferring out to a personal pension. Your partner will then be able to take the whole amount as a tax free lump sum on the grounds of serious ill health (the LGPS doesn't offer a 'full commutation' option, as it is called). Posted by Brynsam

Transferring it out is an option, but note that the transfer value would be based on the pension your partner has accrued to date, and not the extra enhancement to State pension age.

The LGPS does offer ' nearly full commutation' in the event of someone being given less than 12 months to live, but it's only 5 times standard pension (spouse's pension can't be commuted) and so would have to be compared very carefully with options I mentioned above.