Government to loosen terminal illness test for accessing private pensions

Mixed · 2The Government has outlined plans to make it easier for people with a terminal illness to access their private pension savings. 1 2 Mixed · 2The definition of terminal illness used for pension tax purposes will change from requiring 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. 1 2 Mixed · 2The Government said the reforms will reduce differences between pension rules and the wider benefits system, and that under current rules it can be easier for a terminally ill person to access benefits than their own pension savings. The Mirror describes the change as bringing pension tax rules more in line with the 12-month end-of-life definition already used by the DWP. 1 2

Mixed · 2Pensions minister Torsten Bell said people facing terminal illness "shouldn't have to go through red tape to get at their own pension savings" and that the Government was making the rules clearer and more consistent. 1 2 Mixed · 2Dr Sam Royston of Marie Curie said the charity "warmly welcome[s]" the steps, citing its research on dying in poverty, and said it wants to work with the department so the changes give extra support to lower-income households on universal credit. 1 2 Centre · 1The changes are expected to take effect in the spring, and the Government expects to engage with pension providers and others on how terminal illness lump sum payments operate and whether further changes are needed. 1

Left · 1The Mirror adds background: under 75s with under 12 months to live can normally withdraw a defined contribution pot worth less than £1,073,100 as a tax-free lump sum, while over-75s are normally taxed at their marginal income tax rate; the minimum pension age rises to 57 from April 2028. 2