Can I cash in my pension if I am terminally ill?

In the face of a terminal illness diagnosis, many people are often faced with a wide range of incredibly difficult decisions, including those surrounding their financial affairs. Among these considerations is the question of whether it’s possible to access pension funds to alleviate financial burdens or fulfil end-of-life wishes. 

While the prospect of cashing in a pension during such a challenging time might offer some financial respite or assistance with medical expenses, it’s essential to consider all your options first and gain a thorough understanding of the options available. Naturally, the first port of call to gain that knowledge should be a financial adviser.

Here, we discuss the nuanced landscape of terminal illness and pension funds, exploring the options, limitations, and considerations for individuals facing this profoundly challenging situation.

The current health of the nation

According to the LV= Wealth and Wellbeing Monitor, a quarterly survey of 4,000 nationally representative UK adults, a quarter of respondents were forced to retire early due to ill health or injury. Meanwhile, the latest figures from the Office for National Statistics (ONS) have revealed that a staggering 9.2 million Britons aged 16-64 are out of work, with long-term sickness the main driver for around a third of those who are economically inactive. 

These figures suggest a worrying trend, both for the wider economy and, more importantly, for the long-term retirement prospects of the considerable number of people forced out of work due to poor health. But what about people with a terminal diagnosis? There are around 375,000 new cancer cases alone in the UK every year, according to Cancer Research UK. That’s the equivalent of roughly 1,000 new cases every single day.

For anyone facing a terminal diagnosis, the most immediate concerns are likely to centre around how to ensure loved ones and dependents are financially looked after and how to cover additional costs that arise as a result of the diagnosis. Research by Marie Curie has revealed that four in five families living with advanced cancer face income loss and that the total cost of living with a terminal illness ranges from £12,000 to £16,000 each year. 

Can I cash in my pension early due to ill health?

Thankfully, in many private and workplace pension schemes, there are provisions for individuals with ill health, including those with terminal diagnoses, to access their pension funds earlier than the standard retirement age. The specific eligibility criteria and the process for accessing pension funds due to ill health can vary depending on your pension policy and provider. However, here are some general points you might want to consider:

• Understand how your pension scheme defines “terminal illness”: Firstly, pension schemes typically have specific criteria for defining “terminal illness”. This may include a prognosis of a certain life expectancy, such as less than 12 months to live. It’s essential to understand how your pension scheme defines terminal illness to determine your eligibility for a payout.
  
• Understand the options available to you: Depending on your pension scheme, if you’ve been diagnosed with a terminal illness you may have several options for accessing your funds, such as taking a lump sum payment or receiving enhanced pension benefits. Again, it’s important to understand the options available to you and their implications for your financial situation.

• Complete all the necessary paperwork: Pension schemes have a formal application process for accessing funds due to ill health. First and foremost, you’ll need to provide medical evidence of your terminal diagnosis. This will likely be in the form of documentation from healthcare professionals confirming your condition and life expectancy. From thereon in, it’s a case of completing the necessary forms and providing all the relevant documentation requested by your provider.

Can you get your State Pension early if you have cancer?

Unfortunately, even if you have a terminal cancer diagnosis (or any other life-limiting illness) you cannot claim the State Pension any earlier than your State Pension age. However, you might still be eligible for other state benefits, such as Personal Independence Payment (PIP), Employment and Support Allowance (ESA) or Universal Credit (UC). 

If you’re nearing the end of life, you may receive a higher rate of benefits and quicker payments. 

Why you should seek financial advice

Given the complexities involved in accessing pension funds due to ill health, it’s always advisable to seek the guidance of a qualified financial adviser or pension specialist for total peace of mind. A professional adviser can provide personalised advice based on your individual circumstances and help you navigate the process effectively.

While it may be possible to cash in your pension early due to ill health, including a terminal diagnosis, it’s essential to carefully review the terms of your pension scheme, understand the eligibility criteria, and consider the potential implications for your financial future. In such a sensitive and complex situation, seeking the advice of experienced financial advisers, like ours at Hilltop Financial Planning, can give you invaluable support and assistance. 

Speak to Hilltop Financial Planning today

Dealing with a terminal diagnosis is an incredibly challenging and emotional experience. Hilltop’s advisers approach each client with compassion, empathy, and sensitivity, recognising the unique circumstances and concerns they may be facing. They provide a supportive environment where clients feel understood and heard throughout the financial planning process.

Cashing in a pension due to ill health, including a terminal diagnosis, involves navigating complex decisions. Hilltop Financial Planning’s advisers have a thorough understanding of the pensions landscape and can guide you through the process, ensuring you understand the options available to you and the potential implications of your decisions.

“Our advisers specialise in retirement planning and have extensive experience in helping clients make informed decisions about their pension funds,” said Poppy Kelly, Head of Compliance at Hilltop Financial Planning. “They have the knowledge and expertise needed to assess your financial situation, understand your specific needs and goals, and provide tailored advice.

“As well as providing pension advice, our financial advisers take a holistic approach to financial planning. They consider all aspects of your financial situation, including savings, investments, insurance, estate planning and tax implications. This means you receive personalised advice that aligns with your financial goals and priorities.

“Every client’s situation is unique, and our advisers recognise the importance of providing tailored recommendations that meet every individual’s specific needs and circumstances. You can be sure that they’ll work closely with you to develop a customised financial plan that addresses your short-term and longer-term goals.”

By seeking advice from Hilltop’s advisers, you can have the reassurance of knowing that your financial affairs are being managed effectively and that you’re making informed decisions that will ultimately provide the financial security and support that you and your loved ones need during this challenging time.

For pension advice made personal, contact us today on 0161 413 7051 to speak to one of our advisers.