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Document If I am terminally ill, can I claim my pension as a one-off lump sum?

If you are terminally ill and do not expect to live longer than a year, you can apply at retirement to exchange all of your ill-health benefits for a one-off, usually tax-free, lump sum payment. To be eligible to exchange your pension benefits in this way, you must have:
  • membership in the scheme on or after 6 March 1995
  • some of your HM Revenue & Customs (HMRC) personal Lifetime Allowance (LTA) remaining

If you take up this option, your dependants will still get any benefits they are entitled to in full.

If you are under your Normal Pension Age (NPA) at retirement and you have at least two years membership in the scheme, you must complete form AW341 if you wish to exchange your ill health retirement benefits for a one off lump sum payment. 
You should first apply for consideration of entitlement to ill health benefits on either form AW33E (If you’re an active member) or AW240 (If you’re a deferred member).  Once accepted you would send the AW341 form alongside the application for benefits form AW8 (If you’re an active member) or AW8P (If you’re a deferred member). Form AW341 can be downloaded from our website. In this circumstance, if you’re an active member the benefits payable will be enhanced under the Tier 2 regulation.

If you are over your Normal Pension Age (NPA) you are ineligible to apply for ill health retirement benefits; however, you do have the option to exchange your retirement benefits for a one off lump sum payment where life expectancy is less than 12 months. If you wish to exchange your retirement benefits for a one off lump sum payment, you must complete form AW341A and send it to us with form AW8 (If you’re an active member) or AW8P (If you’re a deferred member) and use the reason for retirement – commuted ill-health. In this circumstance, the benefits payable will not be enhanced under the ill health retirement arrangements.

For more information, please see the Terminal Ill Health Factsheet on our website.

To download the relevant application forms, please see our website.
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