This page is about pensions for people affected by cancer. There is information about
A pension is a long term investment. Money paid into a pension plan becomes available when you retire. You can draw on it as early as age 55, or you can defer your pension payments until you are 75 at the latest. If you already have an occupational or private pension scheme, check carefully what it offers. It may pay a lump sum or start the pension early if you need to retire through ill health. Some pension plans will pay the pension, or a lump sum, to your dependents if you die.
Occupational pension schemes are also called employers pension schemes, company pension schemes or superannuation schemes.
The employer makes all or most of the contributions to this scheme. The maximum an individual employee may put into an Occupational Pension Scheme is 15% of their salary. If the employee's current contribution is below this, then it may be increased by additional voluntary contributions (AVCs) to a private pension plan, which will then lead to increased benefits.
You can also pay into a private pension scheme whilst you are a member of your employer's scheme. In any tax year you may pay in up to you annual salary or £40,000, whichever is lower. The limit of £40,000 is known as the Annual Allowance. It also includes any contribution your employer will make.
If you want to join an occupational pension scheme
If you have, or have had cancer it may be worthwhile joining an occupational pension scheme through your job. A principal advantage of these over private schemes is that a large contribution and all administrative charges are paid by your employer. The terms of occupational pension schemes obviously differ from job to job. But they can offer a range of benefits to people with cancer and their dependents. Benefits of joining the scheme may include
- Replacement income if you are off work for long periods due to ill health
- Pension if you have to retire early due to ill health
- Pension for your husband or wife and your children if you die
- Life insurance or a lump sum to be paid to your husband or wife and children if you die before retirement age
The amounts paid out will obviously be affected by the amount paid in to the scheme.
If you've had cancer, you may not be able to join or rejoin an occupational pension scheme at your place of work – the rules and conditions obviously vary greatly from scheme to scheme. Contact your employer's personnel department or the Trustees of the employer's pension scheme. If you have questions you would like answered independently, you can contact the Pensions Advisory Service (TPAS).
If you have an occupational pension
If you have an occupational pension it may be worthwhile checking your entitlements under the scheme. You may want to clarify how payments to and from the scheme will be affected by any change in your financial or medical circumstances.
You may need to have been paying into the scheme for a minimum amount of time before you can receive some of the benefits. The amount of time you have been paying into the scheme can also determine how much you receive in terms of benefits.
If you have not done it already, you should decide who you would like to benefit from your plan if you die, and tell the people running your pension scheme.You can do this on an expression of wishes form, which you can get from them. If you don't do this, it will be up to the Trustees (the people who oversee your scheme) to decide who will benefit.
If you are terminally ill you may be eligible to receive a lump sum from your pension provider. The Trustee of your pension scheme decides about whether you can take this sum. You should contact the pension scheme trustee who will be able to advise you further.
In October 2012 the government introduced automatic enrolment into a workplace pension. This is mainly aimed at those who are employed by smaller companies who do not offer an employers pension scheme. It is being phased in over a number of years and you can find out more on the Department for Work & Pensions website.
Automatic Enrolment or Workplace Pension Scheme
In October 2012, the government introduced automatic enrolment into a workplace pension. This means that every employer must automatically enrol UK workers into a workplace pension scheme if they are aged between 22 and state pension age, and earn more than £10,000 a year. This is being phased in over a number of years. You can read more on the Pensions Regulator website.
The market in personal private pension schemes can be complicated. You should discuss your financial position, needs and concerns with an authorised financial adviser.
Ask your family and friends if they can recommend a trustworthy financial adviser. If this is not possible you can contact Unbiased.co.uk for a list of local Independent Financial Advisers.
There is nothing to stop you taking out a suitable private pension scheme if you have, or have had, cancer. Since April 2001, you do not have to have a taxable income to join a private pension scheme. You can join a stakeholder pension plan and pay up to £3,600 per year whether you have a taxable income or not.
You may be asked to complete a medical questionnaire. You should disclose details of any existing or pre existing condition to the financial adviser or broker who is arranging the plan. You should clarify what would happen under your planned scheme if you were no longer able to make the pre arranged contributions, if you needed to leave your job because of illness, or if you had to call on your pension because of enforced early retirement.
Personal pension plans can provide a range of levels of income. This will depend on the contributions you can afford to make and what restrictions are imposed by Government. Unlike an occupational pension scheme, however, you may have to pay all the fees and charges incurred by the pension yourself (some employers may make some contribution).
Private or personal pension schemes can be expensive to set up. They can also be expensive to run. Since April 2011, you can pay up to 100% of your salary into the scheme, with an upper limit of £40,000. This is referred to as the Annual Allowance. If you want to contribute more than the Annual Allowance, it is sometimes possible to to use the previous 3 years Annual Allowance. Your Financial Adviser will be able to tell you more about this.
Stakeholder pensions may be a cheaper alternative. These are Government approved personal pensions with the charges capped at 1.5% of the fund per year. So they are lower cost than other private pension schemes. They are not occupational pensions, as such. But some employers do offer them and some do also make a contribution. A workplace pension scheme is likely to be cheaper than a Stakeholder pension scheme. Your employer is also legally obliged to make a contribution if you are an employee and qualify for this.
If you die before retirement (or before conversion to annuity) the value of your pension will be paid to your chosen beneficiaries. If you haven't done so already, you can fill out an expression of wishes form so the Trustees know who you want the value to go to.
Personal pensions are very individual. Benefits and costs can vary greatly, but they can also be flexible. You will need to shop around – with your financial adviser – before making any decisions.
Before you start to take benefits from your pension, you should get expert advice from a qualified Financial Adviser. The decisions you make now will affect your income for the rest of your life, and also what will happen to your income and savings when you die. In some cases these decisions cannot be changed.
Usually, most of your pension fund is used to buy an annuity. You can choose to take up to a quarter (25%) of the fund as a tax-free lump sum if you are under 75. The more you take as a lump sum, the less you will have to buy an annuity. The annuity provides a guaranteed income for the rest of your life. There are many annuities to choose from. Most companies offer an open market option which allows you to use your pension fund to buy an annuity from your choice of provider. A good adviser will discuss the options with you and help you to choose the annuity that best suits your circumstances.
Most annuities stop paying out when you die. But some have an option to guarantee payments for 5 or 10 years, even if you die before that time. In that case, the remaining guaranteed income could be paid as a lump sum into your estate (minus taxes). Or what is more likely, is your income is paid to your estate as if you had lived for 5 to 10 years. Some annuities pay a fixed amount for life, while the income from others may change over time. They may increase by at a fixed rate, such as 3% a year, or they may change in line with the Retail Price Index (RPI). The RPI is a way of comparing the cost of living from year to year to see how much it has changed.
Also, you can take out a joint life annuity with your spouse or partner. This means that if you die before your partner, he or she will continue to get an income for the rest of their life. This may be the same amount as you were getting, or 2/3 (66%) or 1/2 (50%) of that amount. Generally a joint life annuity will provide a lower income than a single life annuity.
If you have cancer when you want to start drawing on your pension, you may qualify for an Impaired Life Annuity. This means that you should be offered better terms because of your ill health. You must discuss this with your Financial Adviser.
Another option that could give you more control over what happens to your money, if you die before the age of 75, is called a capital protected annuity, or an annuity protection lump-sum death benefit. This means that if you die before you are 75 years old, the amount that you paid to buy your annuity, minus the amount that has been paid out to you through your pension, is paid as a lump sum into your estate. This lump sum will be taxable, and there may also be inheritance tax to pay on it.
Another way of taking income from your pension is called an Unsecured Pension Plan. It is also known as Flexi Access Drawdown. This means that you can take a tax-free lump sum of up to 25% of the value of your pension fund. And you can put of buying an annuity altogether and leave the remainder of your pension (minus any lump sum) invested.
If you leave some of your pension invested, then you withdraw your income from your pension fund. Previously there were certain yearly limits of what level of income you could withdraw, which were set by the Government Actuary's department. But since the pension reforms in April 2015, the limit has been lifted and you are free to withdraw any level of income that you like. Now the limits have been removed, it is possible to draw another lump sum, or future lump sums when you need them. In theory it is now possible to take all your pension in one lump sum. This option may appeal to people who are seriously ill. But you are strongly advised to get advice from an authorised Financial Adviser before you draw funds from your pension. This is because, depending on the amount of money involved, this may have serious income tax implications.
Drawing your pension income through Flexi Access Drawdown is considered to be a riskier way of using your pension because you are relying on the performance of your investments, and do not have the security provided by an annuity. It is probably not suitable for you if you will only have a small pension fund (after any lump sum is taken off) or you have no other assets.
If you choose to use an Unsecured Pension Plan, you can now defer taking benefits to which ever age suits you best. If you die before retirement (or conversion to annuity) the value of your pension will be paid to your chosen beneficiaries. You can fill out an expression of wishes form so the Trustees know who you want the value to go to.
Another way to draw funds from your pension is to take an Uncrystallised Funds Pension Lump Sum (UFPLS). This is a new option available since April 2015. It allows you to take a one off payment or several lump sum payments directly from your pension fund itself. Each time you take a lump sum through UFPLS, 25% of that withdrawal will be tax free and the rest will be taxed at your marginal rate of Income Tax.
These organisations can help you with advice or if you have a complaint.
Money Advice Service
Helpline: 0300 500 5000 (8am - 8pm Monday to Friday, 9am - 1pm Saturday)
The Money Advice Service has been set up by the government to provide clear, unbiased advice to help you manage your money. Advice and guides on pensions and how to make a complaint are available online or by phone from them. You can check if a firm is regulated by the Financial Conduct Authority (FCA) on their website www.fca.org.uk or calling 0800 111 6768.
The Pensions Advisory Service (TPAS)
11 Belgrave Road
Helplines open 9am -5pm Monday to Friday
Webchat: Monday to Friday 9am to 5pm, Tuesday extended opening 7pm - 9pm
Pensions helpline: 0300 123 1047
Helpline for women: 0345 600 0806
Helpline for self employed: 0345 602 7021
Email: online enquiry form
This is an independent voluntary organisation that provides advice on all types of pension and helps with complaints. If you need help clarifying your pension entitlements contact TPAS or your local Citizens Advice Bureau (listed under Counselling and Advice in the Yellow Pages).
They deal with complaints about pension schemes. You can send complaints in writing directly to this address.
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