Permanent Sickness or Disability and Unable To Work

Published / Last Updated on 20/11/2021

If you are unable to work again due to permanent illness or injury, could you still afford to pay your bills? Would you qualify for ill-health early retirement?

We have discussed in previous videos for short (up to 6 months), medium (6 months to 2 years) and longer term (2 years +) sickness and unable to work with the combinations needed of savings, company or private permanent health insurance and critical illness insurance planning.

If you become permanently ill, disabled or unable to work, you may have some of the above sickness policies to help you.  If, you do not have these, then there will likely be two options:

  • Claiming personal independence payments or other disability benefits
  • Ill health early retirement

Ill Health Early Retirement

If you have a company pension scheme, it will be at the pension scheme trustees discretion as to whether they will allow ill-health early retirement.  If granted, this may be:

  • With penalties
  • With no penalties but only include working service/pension scheme membership to date
  • No penalties and the scheme treats you as if you had worked right up to your normal retirement age.

If you have a private pension scheme, workplace pension or stakeholder type pension scheme, it will be up to the pension scheme rules as to what they will or will not allow for ill-health early retirement.  Some pension providers have stricter rules than others.  Some may require you to buy a guaranteed annuity rate for life rather than allow flexible drawdown.

Terminally Ill – if you are diagnosed as having less than 12 months to live, many pension providers will be able to pay out the full value of your pension tax free.

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