Ill health early retirement
It is possible to draw on the benefits before age 55 but only due to ill health.
A scheme can suspend payments if the member recovers
If the life expectancy is less than 1 year they can commute all arrangements for a serious ill health lump sum but only from uncrystalised or unused funds.
Question - Use Your Note Taker To Jot Down Ideas / Calculations
Brenda, who is 53, is in serious ill-health and has been given permission to commute her entire personal pension fund for a serious ill-health lump sum. Brenda’s fund is currently valued at £2.1 million. She has no other pension benefits and she has registered for fixed protection 2012.
How much will Brenda receive?
a) £2.1 million.
b) £1.935 million.
c) £1.6325 million.
d) £1.155 million.
B)
Brenda’s fund exceeds the lifetime allowance. Since she has registered for fixed protection 2012 she will be subject to a 55% lifetime allowance charge on the excess above £1.8 million:
£2.1 million – (£2.1 million – £1.8 million × 55%) = £1.935 million.