Retiring due to ill-health
Illness happens to us all at some point, occasionally forcing us to stop working for quite a long period. But what happens if you’re so poorly that you can’t return to work at all?
The normal minimum pension age (NPMA) is currently 55, increasing to 57 in April 2028. This is the youngest you can be before withdrawing money from your pension. But if you’re in ill-health, you may be able to start taking money from your pension earlier than this.
What’s ill-health retirement?
Ill-health retirement is when someone is able to access their pension early due to poor health. This is also known as medical retirement or retirement on medical grounds. The condition could be a long-term mental or physical disability, illness, or injury.
Qualifying for ill-health retirement
The criteria to take ill-health retirement depends on the rules set by your pension provider. For example, your provider may consider whether you're well enough to do another job. Perhaps your current role is very physical, but you could still do a desk-based job.
Whatever the rules set, you'll need to provide medial evidence that you're no longer able to work.
Working part-time or changing job
Retiring due to ill-health is not an easy decision as it could have a big impact on your financial future. While gathering the information, you might consider if you can change the way you work rather than retiring altogether.
Your employer must consider any request to change the way you work related to a long-standing medical condition or disability. For this reason, you could ask to reduce the hours you work. You might also consider working in a different industry or profession.
Both of these options could have less of an impact on your pension savings.
How is ill-health retirement calculated?
This can vary so it’s worth getting in touch with your pension provider. They’ll tell you whether you’re able to take your pension early due to ill-health, and what the criteria are. Some providers may allow you to take an income, while others may allow you to withdraw a lump sum.
If you can’t work due to a long-term medical condition, you might be able to get income from other sources. Look into whether you have insurance like a critical illness or income cover for sickness policy. These are designed to provide an income if you’re too ill to work for a prolonged period.
What medical conditions qualify for ill health retirement?
Pension providers have different rules about the conditions that qualify for ill-health retirement so it’s worth checking your policy documents. They may ask how severe your condition is, whether the symptoms are permanent and how they impact your work.
Because of the complexities involved, we strongly recommend you speak to a financial adviser before making any decisions. If you don’t have a financial adviser, there are several directories that you can use to search for one in your area and according to their specialisms. Advisers may charge for their services, though they should agree any fees with you upfront.
Serious ill-health
If you've been diagnosed with a terminal illness, you're under 75 and you're not expected to live for more than 12 months, you can usually withdraw all your pension savings as a lump sum. It's important to check if your pension pot exceeds your lump sum and death benefit allowance otherwise you could end up paying income tax on any amount that exceeds your allowance. If you're over the age of 75, the full amount you withdraw will be taxed as pension income (at marginal rates).
Withdrawing any money from your pension can have tax implications for you and inheritance tax implications for your loved ones. A financial adviser will be able to advise you on the best options to take.
Ill-health and your state pension
Unfortunately, you can’t claim your state pension due to ill-health. But you may be eligible for other state benefits including Personal Independence Payment, Employment and Support Allowance, and Universal Credit.
If you have a Royal London pension, you can access our Benefits Checker. This calculator can help you find out if you qualify for up to 30 different benefits, grants and social tariffs. And because we use your postcode, we can also personalise recommendations to your council area.
What next?
If you’re suffering a serious illness or injury, we understand that things are difficult, especially when you’re facing financial uncertainty. We recommend gathering information to help make good decisions, supported by the advice and guidance of a financial adviser.
Ask your pension provider if you’re able to take early retirement due to ill-health. You can also ask how much money you can withdraw, and how you could apply.
Speak to your employer to find out what provisions can be made for you at work. It’s also worth checking if you have access to income from other sources. Use our retirement planner to understand what your retirement might look like based on your pension savings and other assets.