Death in service benefit

Dwhitworth311

I was wondering if anyone has experience of trying to expedite a death in service scheme on basis of a terminal prognosis.
The scheme is managed by Unum via Standard Life who provide my employers pensions, eligibility is granted on enrolment to their pension which I am in.
I was diagnosed with incurable cancer 3 years ago which has now come to the point of terminal over next 12 months.  I was discussing an exit strategy with my employer so that I can spend last months with family.  Employer has offered a settlement which in the circumstance is generous but is 1/10th of the 8 x salary DIS value.  If I stay employed but go on long term sick to spend time with family we will have no income to survive on between now and my death, if I take the settlement we would have money to live off now but my wife and children will have no financial security the DIS would provide when I’m gone.
My oncologist is willing to provide evidence / testimony of my prognosis and my employer support me trying to get access to the death in service payment.  We would even be willing to accept a lower value than the 8 x salary that would be payable on death.
Is there any precedent or route we can take to access the fund and live in comfort without financial worry and burden in my final months?
Any advice greatly appreciated !

molerat

Surely with a terminal diagnosis you should be able to access the total pension transfer value as a lump sum tax free ?

Linton

molerat said:

Surely with a terminal diagnosis you should be able to access the total pension transfer value as a lump sum tax free ?

See https://www.pensionwise.gov.uk/en/ill-health for further info.

TVAS

Molerat is quite correct providing your GP says you will not survive longer than the next 12 months you can have the pension lump sum tax free. This must be spent in full any amount left will be added to your estate however as you have a wife this will not be a problem as transfers between spouses is exempt from tax. You need to request this I am surprised the trustees have not offered this but they are trying to scam you of your full entitlement.

Death in Service
4 x salary is paid tax free the remaining 4 must be used to buy a spouse pension. You cannot get 8 x death in service tax free. I so not see how 1/1th of the 8 x DIS is generous.

Alternatives
Bank Loan.
Credit card that do money transfer such as MBNA/Tesco Bank. You can explain to the loan people that the sum will be repaid on with the DIS lump sum.  

This is why it is important to have 12 months savings in the bank for income replacement due to unemployment or very sadly in your case terminal disease.
Dig out your scheme booklet to see what it says about ill health. Best of luck. 

Marcon

TVAS said:

Molerat is quite correct providing your GP says you will not survive longer than the next 12 months you can have the pension lump sum tax free. This must be spent in full any amount left will be added to your estate however as you have a wife this will not be a problem as transfers between spouses is exempt from tax. You need to request this I am surprised the trustees have not offered this but they are trying to scam you of your full entitlement. Emotive nonsense. Of course the trustees aren't trying to scam anyone. How do you know the rules provide for total commutation on grounds of serious ill health? It isn't necessarily a right. OP is  in any case asking about the DIS lump sum, which is a totally different issue - and can't be accessed while they are still alive, for obvious reasons.

Death in Service
4 x salary is paid tax free the remaining 4 must be used to buy a spouse pension. You cannot get 8 x death in service tax free. I so not see how 1/1th of the 8 x DIS is generous. Rubbish. A DIS lump sum can be any multiple of salary and does not have to be used in any particular way unless the rules of the life scheme specific otherwise (highly unlikely). There may be an impact if the Lifetime Allowance kicks in, but that's the least of OP's worries right now, even if it applied, which seems unlikely.

Alternatives
Bank Loan.
Credit card that do money transfer such as MBNA/Tesco Bank. You can explain to the loan people that the sum will be repaid on with the DIS lump sum.  Except you can't pledge a lump sum where it is paid at trustee discretion, so yet again you are talking nonsense.

This is why it is important to have 12 months savings in the bank for income replacement due to unemployment or very sadly in your case terminal disease. That is rarely the advice given by the most optimistic of financial planners and most people quite simply can't afford it.
Dig out your scheme booklet to see what it says about ill health. Best of luck.  

Yet again, so many errors...

OP, I am so sorry you are in the horrible position and I apologise for having to put so many grim things in print. You can't 'expedite a death in service' payment because it doesn't become payable until someone actually dies, and the recipient(s) won't be known ahead of time, so you can't 'borrow' against it.

It isn't clear what sort of pension scheme you are in, but it sounds as if it is a defined contribution (money purchase) scheme rather than defined benefit (final salary). If it is indeed DC, then there is no automatic spouse's pension and even if you did access the whole of your fund, it isn't going to be anything like as much as a DIS lump sum of 8 x salary - so the goal is clearly to do both if possible. 

The key words are 'death in service', so you need to stay an employee to get the payment. Depending on the rules of the scheme, your employer's attitude and your terms of employment, one possibility might be to take the whole of your pension fund now as tax free cash, live on that and remain (at least technically) in service. You'd need to check what level of life cover you'd get if you are on unpaid sick leave; that is something your employer/the rules of the scheme will be able to confirm. 

If for some reason you can't access your pension fund now as cash, transferring it out to another pension scheme arrangement of your own choice should mean that you can then take the whole lot in one go. Again, you'd need to check what impact that would have on your DIS benefit.

A shopping list like this is the last thing you need to cope with right now, so don't try and go this road alone. Get some free, expert and impartial help from TPAS: https://www.pensionsadvisoryservice.org.uk 

I wish you and your family well.

Marcon

molerat said:

Surely with a terminal diagnosis you should be able to access the total pension transfer value as a lump sum tax free ?

No - it's the total commutation value in cases of serious ill health, which is often different from the transfer value. I make the point not to nitpick, but to highlight that it is sometimes worth asking for both values and going 'the better route' if the scheme offers total commutation on grounds of serious ill health - assuming someone with little time left to them has them mental energy and resilience to consider transferring out v commutation.

xylophone

The scheme is managed by Unum via Standard Life who provide my employers pensions, eligibility is granted on enrolment to their pension which I am in.

Are you able to remain employed  and a member of the  pension scheme (and DIS insurance scheme) but move some part of your pension to another provider?

Once this was done, on the basis of the diagnosis,  might it be possible to access the whole of the "new" pension tax free and use that to finance your living expenses?

Are you eligible for any  state benefits on the basis of your  diagnosis?

https://www.mariecurie.org.uk/help/support/benefits-entitlements/living-with-terminal-illness/personal-independence-payment#:~:text=Disability Living Allowance.-,How much is PIP?,one or both of these.&text=Disability Living Allowance.-,How much is PIP?,one or both of these.

Sandtree

Do you have any life insurance outside of your DiS? Many policies have terminal diagnosis clauses.

Dwhitworth311

Marcon said:

TVAS said:

Molerat is quite correct providing your GP says you will not survive longer than the next 12 months you can have the pension lump sum tax free. This must be spent in full any amount left will be added to your estate however as you have a wife this will not be a problem as transfers between spouses is exempt from tax. You need to request this I am surprised the trustees have not offered this but they are trying to scam you of your full entitlement. Emotive nonsense. Of course the trustees aren't trying to scam anyone. How do you know the rules provide for total commutation on grounds of serious ill health? It isn't necessarily a right. OP is  in any case asking about the DIS lump sum, which is a totally different issue - and can't be accessed while they are still alive, for obvious reasons.

Death in Service
4 x salary is paid tax free the remaining 4 must be used to buy a spouse pension. You cannot get 8 x death in service tax free. I so not see how 1/1th of the 8 x DIS is generous. Rubbish. A DIS lump sum can be any multiple of salary and does not have to be used in any particular way unless the rules of the life scheme specific otherwise (highly unlikely). There may be an impact if the Lifetime Allowance kicks in, but that's the least of OP's worries right now, even if it applied, which seems unlikely.

Alternatives
Bank Loan.
Credit card that do money transfer such as MBNA/Tesco Bank. You can explain to the loan people that the sum will be repaid on with the DIS lump sum.  Except you can't pledge a lump sum where it is paid at trustee discretion, so yet again you are talking nonsense.

This is why it is important to have 12 months savings in the bank for income replacement due to unemployment or very sadly in your case terminal disease. That is rarely the advice given by the most optimistic of financial planners and most people quite simply can't afford it.
Dig out your scheme booklet to see what it says about ill health. Best of luck.  

Yet again, so many errors...

OP, I am so sorry you are in the horrible position and I apologise for having to put so many grim things in print. You can't 'expedite a death in service' payment because it doesn't become payable until someone actually dies, and the recipient(s) won't be known ahead of time, so you can't 'borrow' against it.

It isn't clear what sort of pension scheme you are in, but it sounds as if it is a defined contribution (money purchase) scheme rather than defined benefit (final salary). If it is indeed DC, then there is no automatic spouse's pension and even if you did access the whole of your fund, it isn't going to be anything like as much as a DIS lump sum of 8 x salary - so the goal is clearly to do both if possible. 

The key words are 'death in service', so you need to stay an employee to get the payment. Depending on the rules of the scheme, your employer's attitude and your terms of employment, one possibility might be to take the whole of your pension fund now as tax free cash, live on that and remain (at least technically) in service. You'd need to check what level of life cover you'd get if you are on unpaid sick leave; that is something your employer/the rules of the scheme will be able to confirm. 

If for some reason you can't access your pension fund now as cash, transferring it out to another pension scheme arrangement of your own choice should mean that you can then take the whole lot in one go. Again, you'd need to check what impact that would have on your DIS benefit.

A shopping list like this is the last thing you need to cope with right now, so don't try and go this road alone. Get some free, expert and impartial help from TPAS: 
I wish you and your family well.

Thanks Marcon, you’re right with the differences between pension and DIS, completely different policies and providers. I can commute DC pension under critical ill health but the value isn’t much due to my length of service and the recent performance of the scheme.

My employer have offered me a settlement which is above what redundancy would be and legally they don’t have to do anything.  They could wait until I’m unable to fulfill the role and dismiss on grounds of ill health which they’ve made assurances wouldn’t happen.  The issue with taking the settlement to live on is it ends my eligibility to the DIS and again the value is nominal in comparison.

They’ve also offered that I take sick leave and they will keep me on the books until I die to access the DIS.  The reason for looking at whether it can be paid earlier is purely to take away the worries and financial restraints of no income in my last months.  With our savings and pension which I could access we are probably ok to live on for around 18 months, however there are things we want to do - mainly start a family which due to my treatment would be through IVF and there are some structural home repairs we need doing so that my wife wouldn’t have to worry about when I’m gone.  

Because it’s such a generous DIS scheme @ 8 x salary we would be happier taking a lower sum and fulfilling some of our goals while there’s time, hence the question.  But if there are legalities that would make it impossible I won’t put too much energy on pursuing it.  If it’s discretionary and down to the provider then we’ll keep trying, we have full support of my oncologist and employer so it’s more a question of whether it is possible and if so what the best angle is to achieve it.

Marcon

Dwhitworth311 said:

Thanks Marcon, you’re right with the differences between pension and DIS, completely different policies and providers. I can commute DC pension under critical ill health but the value isn’t much due to my length of service and the recent performance of the scheme.

Because it’s such a generous DIS scheme @ 8 x salary we would be happier taking a lower sum and fulfilling some of our goals while there’s time, hence the question.  But if there are legalities that would make it impossible I won’t put too much energy on pursuing it.  If it’s discretionary and down to the provider then we’ll keep trying, we have full support of my oncologist and employer so it’s more a question of whether it is possible and if so what the best angle is to achieve it.

Do you have any benefits in previous pension schemes? If so, it's quite possible that you could access those now, however old (or young) you are, given your health situation.

There are huge and probably insurmountable hurdles to overcome in trying to get an insurer to pay out in advance of an event which hasn't get happened and may never happen (i.e. you may not be an employee at the time of your death, and thus no valid claim could be made against the insurer). Whether your employer is prepared to take the risk of making a payment to you now/claiming under the insurance policy later is another matter - that's a discussion you need to have with them, but I can't pretend it is likely. 

I truly wish I could come up with something (anything) more positive, but I really don't want to give you false hopes.

Marcon

Dwhitworth311 said:

If I stay employed but go on long term sick to spend time with family we will have no income to survive on between now and my death, 

One small thing to double check...you say 'no income'. Are you sure that your employer does not offer Permanent Health Insurance (nothing to do with private medical cover such as BUPA), aka salary replacement insurance? More than once I've seen an employer fail to remember that they are providing this benefit, so although it's highly unlikely they have overlooked it, I'd still ask them to confirm. It wouldn't give you the lump sum you are hoping for, but at least it would give some income.