Most people must wait until at least age 55 to access their pension (rising to 57 from April 2028). But if you have a serious illness with a short life expectancy, pension rules allow for earlier and potentially tax-free access. Understanding how this works can make an enormous difference to financial planning during a very difficult time.
The Two Types of Ill-Health Pension Access
It is important to distinguish between two different situations:
| Situation | Type of access | Tax treatment |
|---|---|---|
| Unable to work due to illness or disability | Ill-health early retirement (DB schemes) | Pension paid early — taxed as income as normal |
| Life expectancy of less than 12 months | Serious ill-health lump sum | May be entirely tax-free (under age 75) |
This guide focuses on the second — serious ill-health lump sums for those with a terminal prognosis.
Serious Ill-Health Lump Sums: The Rules
Under age 75:
- You can take your entire remaining pension as a lump sum
- If you have not previously taken 25% tax-free cash from the pension, the full amount may be free of income tax up to the lump sum allowance (£268,275 in 2026/27)
- Amount above the allowance is taxed at your marginal income tax rate
- If you have already taken some tax-free cash from the pension, only the remaining allowance is available
At or after age 75:
- Serious ill-health lump sums are taxed as income — the tax-free treatment does not apply
- You may still be able to access the pension, but all withdrawals are subject to income tax
Medical Evidence Required
Your pension provider will require:
- A letter or certificate from a registered medical practitioner (your GP, specialist, or consultant)
- Confirmation that your life expectancy is less than one year
- Some providers have standard forms; others accept a letter from your doctor
Contact your pension provider directly — most have a dedicated serious ill-health process and will guide you through requirements.
Defined Benefit Pensions
For DB schemes, serious ill-health rules depend on the scheme rules rather than solely on HMRC provisions. Your scheme may offer:
- A commutation of the pension to a lump sum (a “trivial commutation” or scheme-specific provision)
- Enhanced benefits on incapacity grounds
- A spouse’s or dependant’s pension continuing after your death
The scheme trustees must approve any early access. HMRC rules set maximum tax-free amounts; scheme rules govern what the scheme will actually offer.
Impact on Your Lump Sum Allowance
The lump sum allowance (LSA) of £268,275 in 2026/27 is a lifetime limit on tax-free pension cash. If you have already taken some tax-free cash (the “25% lump sum” on a previous pot), your remaining allowance is reduced.
Example: You previously took £50,000 tax-free from a pension at age 60. Your remaining LSA is £218,275. If your remaining pension pot is £300,000 and you take it under serious ill-health rules at age 68, £218,275 is tax-free and £81,725 is taxed as income.