It’s Bit Quiet at Cancer IFA
But then I get a phone call. A young lady has seen my site and has cancer. In the space of 3 years, she has gone from being a mum, being diagnosed with breast cancer, having a single mastectomy and then informed that the cancer is terminal. She has two pensions and has done the paperwork to get a Serious Ill-health Lump-sum payment from each one. The small one from a defined contribution scheme, has already been paid out. The larger one is a final salary scheme and the trustees have made her an offer of a modest five-figure cash sum. What do I think? Can I advise?
The answer here is a straight forward No but doesn’t mean that I cannot help. The conversation lasts 20 minutes before I get any detail and on my part, is mainly listening. To get an opinion on the amount or recommendation will involve a financial adviser and since the pension is final salary, the services of an actuary – number cruncher. The cost of these is unlikely to be less than 10 per cent of the sum offered. After 30 minutes chat, we leave things there until I get an email a few weeks later informing me that she is accepting the sum offered and thanking me warmly for my help.
Advising the terminally-ill on how to get a Serious Ill-health Lump-sum payment goes back to 2006 – before my own throat cancer in 2007. Most enquiries have been from financial advisers “My client has cancer, what do I do?” and some from cancer sufferers directly. All these enquiries have been related to uncrystallised pension benefits – meaning that they have not been touched yet, no benefits have been withdrawn.
But then a friend asks me “What if the pension scheme member is terminally-ill BUT they have taken the tax-free cash already i.e. the pension funds are now crystallised?” My instinct tells me that they should also be available tax-free, but best to check with a pensions guru. He informs me a few days later that the funds can be withdrawn, but will be taxed as income – it will not be tax-free – Para 4 (2). So you learn something every day.
Bureaucracy can be Heartless
I speak to a lady whose father is terminally-ill. She is trying to get his pension benefits paid out as a Serious Ill-health Lump-sum. His pension scheme says No! If he dies as a “deferred member” nothing will be paid out – that is what the scheme rules say.
But curiously and illogically, they say he can do a transfer?
What this means is: stays with scheme – dies – no pay out.
Does transfer (say to a personal pension) does the paperwork for a Serious Ill-health Lump-sum payment, all funds paid out tax-free.
Before doing the transfer which will involve a financial adviser (i.e. not yours truly) I suggest she points out this inconsistency in writing. Father’s pension scheme responds by sending her forms which are all completed and returned and then nothing. In the meantime, father is getting weaker and more distressed and she has contacted The Pension Ombudsman.