My Personal Circumstances: My Health. For Preserved Members of Defined Benefit Schemes

Transcription

1 My Personal Circumstances: My Health For Preserved Members of Defined Benefit Schemes

2 My Health Preserved Members This Factsheet discusses some of the main issues relating to your health, and how this can affect your retirement planning. It is written for people with a preserved benefit held within a defined benefit scheme. UIntroductionU UWhat are the important health issues I should consider?u UWho should I discuss my health with in terms of my pension?u UWhy is my health significant in terms of my pension benefit?u UDo all schemes pay pensions to members suffering from ill health?u UHow do I find out if my scheme pays an ill-health benefit?u UIf there is no ill-health benefit can I get my pension benefit early?u UWhy is my family s health important in my pension planning?u UCan taking my pension benefit early affect other state benefits?u UMy health isn t good what should I consider?u UMy health is great what should I consider?u USummary & Key PointsU Introduction This Factsheet looks at the major health issues YOU should be thinking about when it comes to retirement planning. Your health affects your ability to maintain your current lifestyle and your expectations about what you might want to do in the future. Your ability to maintain your aspirations will depend upon a number of factors including your pension arrangements. The Factsheet is designed to make you think about how your health could have a bearing upon your pension benefits and those of your dependents. Some of the points are more obvious than others, but they are all important, so take a while and think about you, your health and that of your family. If you are intending to get advice from a Financial Adviser, ask them to take into account your answers to all of these questions, as well as any other health considerations you may have. 2

3 What are the important health issues I should consider? Your state of health will affect your retirement planning, so you need to consider that status in terms of what it has been in the past, what it is now and your expectations of what it is likely to be in the future. So, in terms of key questions to ask yourself think about How you would describe your health in the past? How would you describe your current health? Are there any health conditions that you suffer which could have an impact upon your retirement planning? Are there any hereditary health conditions in your family that may have a future effect on your retirement planning for yourself and your dependants? People maintain their homes, their cars and even their mobile phones but seldom make the same time and spend the same effort on their pension benefits until it s often too late. Who should I discuss my health with in terms of my pension? If you are receiving advice e.g. through a Financial Adviser (or any other adviser for that matter), you may have been asked health questions as part of the advice process. Make sure that your adviser clearly understands whatever terms you may use to describe your health (e.g. poor, fair, good, or excellent) as this could affect the advice you receive. If you are talking to your former employer or pension scheme about your health it is equally as important that they too understand fully what you mean when you describe your health. Don t assume that your own description of your health will be clearly understood by your adviser or pension scheme. 3

4 Why is my health significant in terms of my pension benefit? The benefit you and your dependants receive from your scheme depends upon the circumstances when you (or they) claim a benefit. The value of the benefit will depend upon whether you survive to claim your retirement benefit, and how long you live after that. So a change in your health could affect when you decide to claim your pension benefit. Poor or deteriorating health may also mean that you are unable to work through to your Normal Retirement Age - if this is what you currently intend. It may also impact upon how you take your pension in terms of whether you maximise any cash lump sum that may be available or whether you decide to maximise your pension as income. Example: My husband worked for XYZ Ltd for 35 years and contributed to their pension scheme throughout that period. Had he lived we would have been reasonably comfortable but he died shortly before he was 65 and all I received was the contributions he had paid - this isn t fair! Had I appreciated that my husband s pension benefit at retirement date was so much more valuable than the benefit payable on his death before that date, we could have taken action to plug the gap. Do all schemes pay pensions to members suffering from ill health? Some pension schemes provide ill health benefits for preserved members before Normal Retirement Age but the benefits can vary greatly. It depends upon the Scheme Rules and the current policy of the Scheme Trustees in dealing with this situation. Many pension schemes provide no ill health benefit to preserved benefit members so if you suffer poor health you may need to seek advice on how to access your pension benefit through other means. 4

5 How do I find out if my scheme pays an ill health benefit? Write to the pension scheme trustees (or the scheme administrators) but be specific telling them that you are a member with preserved benefits. This is very important as some schemes may only pay ill health benefits to active members and even then only after detailed medical investigations. Remember that the pension scheme could change its ill health benefits practices in the future, so it is makes good sense not to rely on information you had in the past that may now be out of date. What may have previously applied to a colleague in a similar situation may no longer be available to you. If there is no ill-health benefit can I get my pension benefit early? This may be possible if, for example, early payment with a reduced benefit is allowed by the scheme, or if you transfer your benefits to an alternative arrangement which would allow an earlier payment. Unless you are in serious ill health, you will not be able to access your pension in any arrangement before age 50. After 2010, this age increases to 55 for most of us. In either case, a full analysis of your situation should be performed prior to this to ascertain whether this is a suitable course of action. Your Adviser may be able to conduct an analysis for you, or may be able to put you in touch with a suitably qualified specialist. 5

6 Why is my family s health important in my pension planning? You should look at the health of your parents and grandparents as well as the health of your dependants. Consider if there are any problems, which, if inherited, may mean your early retirement or death. A dependant s benefit can be a valuable asset in the event of your early death, but this in turn could have limited value if those who might expect to receive the benefit are also in poor health. Remember that pensions are only part of your financial planning and should be included in any inheritance tax solution you have undertaken. Can taking my pension benefit early affect other state benefits? This is indeed possible, so careful consideration is required to avoid unnecessarily losing money from one source while receiving it from another. If in doubt, seek advice. 6

7 My health isn t good what should I consider? If your health is such that you need to think about drawing your pension benefit soon, remember that your pension scheme may: provide ill-health benefits for preserved members so you should obtain further information about this from the Trustees change the procedures affecting ill heath early retirement in the future so if the option exists now it might be wise to take advantage of it, if your health is deteriorating. Don t rely on information from old scheme booklets that may be out of date. Write to the trustees or scheme administrators of your pension scheme. Then seek advice. My health is great what should I consider? If you are currently in good health - congratulations! If you are close to the age when you might normally expect to receive your pension benefit you may wish to consider whether deferring your pension would make financial sense for you and your family. Remember also, your health may deteriorate and it still makes sense that you should at least consider what would happen to your finances if it takes a turn for the worse. So, all of the other items in this Factsheet are as relevant to someone in good health as someone suffering poor health. 7

8 Summary & Key Points When making enquiries about your preserved benefit it is very important that you make it clear that you are a preserved member rather than an active member or pensioner member. Active, preserved and pensioner are different classes of membership of a pension scheme and any definitions and paragraphs contained within your Scheme Rules or scheme literature relating to any benefit may differ considerably between these categories. On average, people change jobs every 5 to 6 years. It is possible therefore, that you will have more than one pension benefit. For each element of your pension benefit, you need to consider the following items: Your current state of health: Does your pension scheme provide ill health benefits for preserved members? Are there any health conditions that you suffer which may have an impact upon your future retirement planning? Are there any hereditary health conditions in your family that may have an effect on your retirement planning? What if your health deteriorates between now and your Normal Retirement Age? Are you sure that when asked, you have accurately described your health to your advisers and pension scheme? If you are considering taking your pension early because of your state of health, will this affect any state benefits you are or may be entitled to? Keep informed. Your scheme may modify benefits and Rules. Legislation may change. Your circumstances may alter. Rules differ from scheme to scheme and are wide and varied in content. Don t assume that what applies to one of your pension schemes will necessarily apply to others that you may have. HMRC impose rules that registered pension schemes must conform to. People seldom have identical pensions and you should avoid drawing comparisons with colleagues whose circumstances may at first appear the same but could emerge as having significant differences. This is not an authoritative document. Seek professional advice from an appropriately experienced and qualified adviser. My Health v2.2 Preserved DB Last updated 01/09/2008 8

9 This page is intentionally blank. 9

10 This Factsheet contains general information on particular points of interest associated with pensions but is not intended to be a complete or authoritative guide. MyCompanyPension.co.uk Ltd is not registered with the Financial Services Authority and does not give advice under the terms of the Financial Services and Marketing Act This Factsheet does not constitute any form of advice or recommendation and should not be relied on in making (or refraining from making) any specific personal or business decision. MyCompanyPension.co.uk Ltd PO Box 240 Telford TF6 5YN enquiries@mycompanypension.co.uk MyCompanyPension.co.uk Ltd 2009