Ill health and pensions

If you’re ill

You may be able to take your pension pot early if you can’t work because you’re too ill.

This could be before you’re 55 or your ‘selected retirement age’ – the age you agreed with your provider to retire.

Speak to your provider about the rules of your pension – it will depend on their definition of ‘ill health’.

An ‘enhanced’ or ‘impaired’ annuity may pay more than a standard annuity if you smoke or have a medical condition, eg diabetes or high blood pressure.

If you’re seriously ill

Special tax rules apply if you have a serious illness which means you’re expected to live for less than a year.

You may be able to take your whole pension pot tax free if all of the following apply to you:

  • You’re expected to live for less than a year because of serious illness.
  • You’re under 75 (if you’re over 75 you pay 45% tax on the lump sum).
  • You don’t have more than the lifetime allowance of £1 million in pension money.

Check the terms of your pension with your provider. Some pensions will keep at least 50% of your pot for your spouse or partner.

You’ll need to think about whether you want a cash sum now or a type of income. You’ll also need to think about how you want to leave money behind.