The Government has outlined plans to make it easier for people with a terminal illness to access their private pension savings. Under the proposals, the definition of terminal illness used for pension tax purposes will change from a requirement for medical evidence that someone is expected to live for less than one year, to a slightly more flexible test that death can reasonably be expected within 12 months.
Reducing differences with benefits system
The reforms will also reduce differences between pension rules and the wider benefits system, the Government said. Under current rules, it can be easier for someone with a terminal illness to access their benefits than it is to get their own pension savings, it added. Being able to access private pension savings can help to ease financial pressures for people dealing with a terminal illness.
Minister and charity respond
Pensions minister Torsten Bell said: “When someone is facing a terminal illness, they shouldn’t have to go through red tape to get at their own pension savings. That’s why we’re making the rules clearer and more consistent, so that people can access their own money when they need it the most.”
The Government said the success of automatic enrolment means nearly 90% of eligible employees are saving into a workplace pension. Dr Sam Royston, executive director of research and policy at Marie Curie, said: “Marie Curie’s ‘dying in poverty’ research has long highlighted that a terminal diagnosis can have a sudden and significant impact on a household’s finances, as income drops and other costs increase. We therefore warmly welcome steps to make it easier for people who are terminally ill to access their private pension savings. These changes can help provide greater security and reduce financial stress at a time when people should be able to focus on whatever matters most to them, rather than worrying about how to make ends meet. We look forward to working further with the department to ensure these changes are implemented in a way which provides additional support to lower income households on universal credit.”
Implementation timeline
Changes are expected to take effect in the spring. The Government expects to engage with pension providers and others on the operation of terminal illness lump sum payments and whether further changes are needed.
