Ill health retirement

Hi Lochs and glens

Thanks for getting in touch. I’m so sorry to hear about your diagnosis.

Pensions can be a tricky subject without knowing the ‘ins & outs’ of your particular scheme and your situation. I’ve prepared some information below, but it may also benefit you to call us on 0808 808 0000 to discuss in more detail.

You’ve mentioned Serious Ill Health Retirement. This is available to someone who has been diagnosed as terminally ill, usually defined as having a life expectancy of less than 12 months. This would provide you with a one off, tax free lump sum. Here are some things to think about:

• Before accessing a pension in this way, it’s important to check the death benefits payable if the person died before accessing their fund and compare with the serious ill health payment being offered.
• If this option is chosen, the whole fund will be used up and there will be no benefits payable to family on death.
• Any money taken from a pension, but left in the person’s estate on death could be subject to inheritance tax.
• A lump sum could affect any means-tested benefits.
• There will be no regular income.

If someone decided to leave their pensions where they are and not access them, the money would still be inherited without tax to pay, providing the claim was made within 2 years of the scheme being notified of death and that death occurred before age 75.

Finally, if you were to consider drawing down your pension (not on Serious Ill Health grounds) then you’re entitled to take up to 25% of the value of your pension pot as a tax-free lump sum. The remaining money in the pot will be subject to income tax when you start to draw down. You can either leave the pension invested or you can purchase an annuity. If the pension remained invested, your husband could still inherit whatever was left. If you chose an annuity, then there’s no ‘pot’ to inherit but there are some options such as if a spouse pension was included or you opted for a guarantee which insured a minimum about of payments from the annuity.

Regardless of which option you chose, it’s important to make sure that you’ve completed an Expression of Wish Form. This tells the trustees of the scheme where any death benefits should be paid if you were to pass away.

If you’re after specific advice, then it may be worthwhile speaking to an Independent Financial Adviser. They would chat about your specific circumstances and make recommendations about your pensions to maximise income for you and your family. If you’re unsure on which adviser to use, you can find local advisers here.

I hope this answers your questions, but if you need to discuss further, please get in touch. Just so you know, we can also talk about things like mortgages, life insurance policies and general estate planning. Our free phone number is 0808 808 00 00 and we are available on webchat here.

Yours Sincerely,

Joe

Financial Guide

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