RPSM08100080 - Technical Pages: Pension age: Serious ill- health

Serious ill-health

Pension benefits may be fully commuted to a lump sum and taken on the grounds of serious ill-health at any age before the member’s 75th birthday, providing that at the time the benefits are taken the scheme administrator has received evidence from a registered medical practitioner that the life expectancy of the member is less than a year. However, where the member is married or a civil partner at the point of crystallisation, 50% of the benefits derived from any contracting-out rights must be retained by the scheme to provide for a survivor’s pension.

Only uncrystallised pension benefits may be commuted on these grounds.

Lump sum benefits paid on serious ill-health grounds are tax-free providing that they do not exceed the lifetime allowance.

Any lump sum paid in excess of the lifetime allowance is taxable unless the member has registered for protection (see RPSM03100000).