What if I am not allowed access to my pension?
You can challenge the decision made by the pension managers/trustees on the basis that the decision made maybe flawed. It does not necessarily mean the decision will be changed, but you can ensure the correct procedures were taken. The pension provider must be seen to have asked the right questions, kept correctly to the law in relation to scheme membership. The decision-makers must consider all and only relevant factors and come to a decision that any reasonable person would.
How do scheme rules differ?
Retiring early through ill health is generally accepted, but you will need to read your scheme rules to find out exactly what they allow for. The provision is generally known as “ill-health pension” and can be claimed when you suffer from either mental or physical illness which prevents you from carrying out your job description. The text you will normally see in your scheme is: “your physical or mental health is bad enough to stop you from carrying on working, or which seriously reduces the amount you can earn”1
What contributions will be made to my pension?
It maybe that due to the change in your life circumstances you will be unable to carry on making the same contributions to your pension. In which case your pot will grow at a slower rate (money purchase pension) and provide lower retirement benefits when you decide to start drawing down. If you have a personal or stakeholder pension and took out Pension Contribution Insurance (PCI) this can help with payments.
If you have a work pension scheme and your employer is still paying you an income, then contributions will continue to be paid into your pension They will also deduct your contributions from your pay and pay them into the scheme. If however they stop paying your normal salary due to your ill health your contributions could reduce or stop
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How do I access my pension?
- First of all, consider how taking your pension early may affect your future financial stability. Has your employer considered all options, including making adaptions to the workplace and working part-time? Are there other outlets for securing an income while you are ill – such as claiming benefits or committing to another job role.
- Check your eligibility with your scheme rules. Rules may state that it must be evidenced that you cannot perform any occupation before you can consider retirement options.
- You will need to obtain medical certification that proves that due to a result of injury, sickness, disease or disability you are too ill to continue your current occupation and that you have subsequently ceased that occupation due to ill-health. It is recommended to check your scheme rules for exact needs and rules.
Check what type of pension you have in order to determine:
What savings are available for access
A money purchase scheme would be based on the size of your invested savings and individual scheme rules, while a final salary scheme is valued on the cash equivalent of the benefits.
The options for how you take your money
You can take your money as an income, a lump sum or take some while keeping some money invested. Your pension rules will tell you what your options are.
Be aware of your tax position
You could take up to the first 25% of your savings tax-free and the rest is taxable at your marginal rate.
Hopefully the information in this guide has given you a clearer idea of the pension options available if you can no longer work due to ill-health. Below are three of our most frequently asked questions.