Early Ill Health Retirement

MJB1980

Hi all

I’m seeking some advice on whether I would qualify for early ill health retirement and whether it would be the best option for me.

I’m 46 years of age and in March 2026 was diagnosed with a stage 3 brain tumour with a prognosis of between 5 and 7 years left to live. I’ve had surgery and radiotherapy and am due to commence a 12 month period of chemotherapy next month during which I am highly doubtful to be able to work.

I am still currently employed although have only been receiving SSP which is due to end mid-Sept at 28 weeks after which I will be hopeful of claiming Employment Support Allowance (ESA) whilst I am undergoing Chemo.

The issue I have is that I’m unable to balance my books and am losing c.£2k per month whilst unable to work so am looking at different options to get some money coming in.

I am fortunate enough to have c.£50k in savings, unfortunately though this rules me out from receiving UC or council tax benefits etc as they are all means tested so I’m now looking into the possibility of cashing pensions in.

I am a deferred member of LGPS (since 2015), it doesn’t state what the fund value is but my latest statement suggested an annual pension of just over £6k (at 68 years) and the death benefit is £32k.

I have an Aviva pension from an old job with a fund value of £40k.

And in my current employment I pay into Nest with a fund value of £3k.

Q1) Is there a realistic chance of cashing in my pensions considering my circumstances? There is zero possibility of me ‘getting better’ and so I am officially classed as terminal although I’m not yet within 12 months of end of life. I’m aware I may have to contact them separately due to different rules, terms and conditions etc.

Q2) Would there be any tax implications were I to qualify for receiving a lump sum payment, or would I lose a large proportion of the value in fees etc?

Q3) From a financial perspective would I be better off using my savings to support myself rather than even considering touching my pensions?

For context, I am divorced but still very amicable with my ex-wife. We have two children together aged 7 and 5, both are named as equal beneficiaries on all 3 pensions and both are also equal beneficiaries in my will.

I do also have a life insurance policy in place which will pay out £250k to my ex-wife should I die before I am 63 to enable her to continue to provide for the children in my absence.

I’m so sorry for the long post, I’m usually very good with money I am just clueless when it comes to pensions.

Thank you

Martin

Marcon

Martin - I'm so sorry to read of your predicament.

If you qualify for ill health early retirement under the rules of a particular scheme, then there is no minimum age at which you can access your benefits.

A defined benefit scheme would not normally permit you to 'cash it in', but would pay out a tax free lump sum and ongoing (taxable) ill health pension, calculated in accordance with the rules of the scheme, once your application has been approved.

The exception to that (and then only if the rules of the scheme permit) is if you are in 'serious ill health'. That has a particular meaning in pensions - it means you have written evidence from a qualified medical practitioner confirming that your life expectancy is no more than 12 months. If that's the case, and providing your pension has not come into payment, it may be possible to take all your benefits as a one-off tax free lump sum. Given you do not have that sad prognosis, you are not going to be able to do that.

We have several LGPS experts on this forum and either @Silvertabby or @Lemon_dr1zzle is far better qualified to reply than I am in respect of your deferred LGPS pension.

If your Aviva pension is some sort of defined contribution arrangement, then it may be possible to cash that in if you have medical evidence confirming that you will not be able to work again, usually with a rider such as 'in any job' (and from your question, it's not completely clear whether that's the case?). 25% would be tax free and the remainder taxable at your marginal rate.

It's impossible to know what your best financial course of action is likely to be based on the information you've given. A good adviser equipped with all relevant information would be best placed to help, including looking at the possibility of transferring out of the LGPS to a personal pension - which is a long way from being a simple decision.

I wish I could give a more helpful reply.

DRS1

Re the LGPS have you read this?

Taking your deferred pension :: LGPS

It is not about getting a lump sum but maybe getting the pension put into payment early. There may be a distinction to be drawn between can't do your job and can't do any job but it could be worth exploring that before looking at the other pensions (which look like they may be DC schemes).

p00hsticks

I'm sorry to hear about your situation.

I can't answer the questions about your pension, but wonder if in additon to ESA you have considered applying for PIP, which is not means tested and does not prevent you from working if able.

If you have a Macmillan CNS contact, they can often give advice about benefits and help with applications

Silvertabby

So sorry to hear this.

In the case of your deferred LGPS pension, you may apply for this to be brought into payment on ill health grounds. It wouldn't be enhanced, but it would be paid without any reductions for early payment.

You would need to submit your application through your old employer, who will then arrange for a medical review to be carried out by their own Occ Health Dr. The basic criteria would be that you are permanently unfit to carry out the duties of your old job, and unfit to be employed 'in a meaningful capacity' in any job for at least 3 years. Meaning at least 30 hours a week.

From what you have said, if you do meet the ill health criteria, then you would only be offered immediate pension payments, with the option of commuting (giving up) part of your pension in return for a higher tax free lump sum. Total commutation - ie, cashing in your pension totally - would only be offered if you had a prognosis of less than 12 months. But that is rarely the best financial option to go for, as it would only be 5 X annual pension.

Best wishes.

MJB1980

Thank you all for the replies so far, very helpful.

It is uncertain whether I would be considered fit enough to work at the conclusion of chemotherapy, I have been made aware of the expected side effects during treatment but not anything longer term. I have a meeting with my consultant before treatment starts so may be able to ascertain a bit more information although I suspect there may be too many variables to give an accurate prediction.

I had rang McMillan benefits advice when I was first diagnosed and at the time I was advised that I wouldn’t qualify for PiP as I am still mobile and capable of carrying out everyday tasks. I am only suffering with fatigue at the moment so I don’t think I meet the criteria unfortunately.

I will seek out financial advice locally and may hold off until I’ve had chance of further medical input but if anyone else can contribute any further advice I will be glad to take any.

Thanks again