Eva and her husband Graham run Henley Scan and credit their pension with allowing them to keep their (Image: Kathryn Fell Photography)
Eva and her husband ran a successful business but that all changed when Graham was diagnosed with an aggressive in October 2022.
The couple who run Henley Scan had taken out medical but found out they were not covered.
Eva said: “Graham’s cancer was pancratic, and he was given a seven % chance of survival, it was such a shock.”
Eva, who will be 60 in March, said the couple accepted they would have to sell our home.
Graham, now 63, was 61 at the time of the diagnosis. “We were also told 50 % of the people who have pancreatic cancer are dead within six months.”
The couple “dropped everything”. “We had a shop on the high street where we digitise old tapes, videos and slides, but and we weren’t able to man the shop. So we closed the shop and moved the business home.”
Eva was also unwell. “I have a rare immune disorder Birdshot chorioretinopathy. “It affects blood flow to the eyes, but is under control, although I am on a lot of medication.”
Because they were over 55 they were able to start accessing their pension. “At first we used the 25 % cent tax free lump.”
Soon it became obvious that they needed additional income. Eva said: “We still had a , a legacy of having put our three children, now 20, 25 and 32, through private school.”
Don’t miss…
The couple, who had both previously worked for Vodafone, had cashed in their final salary schemes in 2018 when they set up Henley Scan.
Eva added: “We were given very generous transfer values.”
The couple had been given lump sums which were then put into private pensions for them.
She said: “We got a very good deal at the time Vodafone they offered us good money.”
The couple then made the decision to start taking a regular income from their pensions. “It paid for the bills and it gave us the financial breathing space we needed.”
Graham had Whipple surgery and is now having six monthly scans to make sure he continues to be in the clear.
Eva said: “We still work but from home and part time and flexible. We have this work-life balance. The pension means we can pay for all the basics. It’s not a huge amount but it’s a relief to know things are covered. And less pressure on the business.”
What happens to your pension if you get ill
If ill health means you are no longer able to work you may be able to get some or all of your pension early.
How much you can withdraw and how that money is taxed will depend what type of pension you have and how unwell you are.
The cannot be accessed earlier due to ill health but personal and occupational pensions can offer savers a little more flexibility.
Private and workplace pensions can only be accessed once you turn 55 – this is set to increase to 57 by 2028.
Atlthough in the event of ill-health, pension schemes may be able to provide benefits earlier.
In the more extreme case of serious ill health, defined by a life expectancy of less than a year, some savers may be eligible to receive the entire value of their pension benefit as a tax-free serious ill health lump sum, regardless of their age at the time.”
Defined benefit pensions, the gold-plated schemes run by both public sector and private employers, allow people to take early retirement if they can no longer work because of ill health.
This might be a result of an accident or a long-term, but not necessarily a terminal or life-limiting, health condition.
David Brooks, head of policy at Broadstone, said: “All schemes will have different rules when it comes to ill health. “But in most cases they will need evidence the person is and continues to be medically incapable, both physically or mentally, of continuing their current occupation as a result of injury, sickness, disease or disability.”
Brooks warned: “The member may also have to satisfy the trustees and the sponsoring employer and this requirement can be time consuming.”
If conditions are met an ill health pension payment can be paid before the normal minimum pension age of 55, or age 57 from April 2028.
Rather than a lump sum, those in a defined benefit scheme can take their pension as a regular income.
Brooks warned some schemes will stop the pension if the saver then recovers. He said: “This can be very hard for trustees as members are often still suffering with the initial condition, or even worse. However, the trustees do have a duty to ensure the benefits being paid are to those who should be receiving them.”
Justin Corliss, senior pensions development and technical manager at Royal London, explained that active members, those still working for the employer running the scheme may even still get an increase in their pension income, although it would not be as much as if they were still working.
The rules around early pension payments and ill health are different if the pension is a defined contribution one, DC schemes include both personal pension and employer schemes.
Unlike a DB pension there is not an infinite amount of cash so if you need to access your pension early, then you can be at serious risk of draining your pension funds down
As with the DB pension you will need to approach your pension provider and provide evidence.
Taking your money from your pension as a lump sum, in addition to the 25 per cent tax-free cash allowance, means it is no longer protected from inheritance tax if you do die before it is spent.
Clare Moffat, Royal London pensions expert said: “Not only will taking your pension early lead to some unwanted tax liabilities and it may impact on any state benefits.” Moffat and Corliss warned that savers may be better off leaving their pension untouched for longer if their life expectancy isn’t compromised.
What happens to your pension if you are terminally ill
If you are diagnosed with a terminal or life-limiting illness you may be eligible to take a serious ill health lump sum, or Sihls, from your pension.
The rules apply across DB or DC schemes. To qualify you will need to have less than 12 months to live; as this type of lump sum is effectively an early lump sum death benefit payment.
You can withdraw up to £1,073,100, the old Lifetime Allowance, without having to pay tax.
If the amount in the pension is more than £1,073,100, tax will need to be paid at your marginal rate.
The marginal rate is the rate at which you pay tax after taking into any other taxable income you earn.
Moffat said while the rules around Sihls could appear more clear cut than taking an ill health payment, qualifying for one could be challenging.
“I think a lot of doctors are loath to say that someone’s going to live for less than 12 months “Unless someone is very ill, knowing whether they are going to live nine months or 15 months will be a tough call..”
Moffat also said that anyone needing to access their pension early, if they had a terminal illness, would always have their application fast tracked.
David Brooks, head of policy at Broadstone, said: “Ill health and terminal illness benefits are not always well known to members and if members are suffering, they should certainly contact their scheme. The criteria can be stringent at times, but this should not be a barrier to asking and ascertaining the position to ensure the best outcome for the member and their family in the hardest of times.”