What Qualifies for Ill Health Retirement and How Do I Apply?
Last updated 29th November 2021
5 min read
You may be entitled to ill health retirement if you have a health condition or disability that stops you from being able to do your job. If you’re eligible, you’ll be able to retire early and start claiming your personal pension before the age of 55.
This post explains what you need to know about ill health retirement (also known as medical retirement). Along the way, you’ll learn about the conditions that qualify for ill health retirement, the possibility of increased payments, the application process, and other state benefits you could receive.
Early retirement due to ill health
In most cases, you can start drawing from your personal pension at 55. If you have a health condition or disability that makes it hard for you to work or reduces your earning potential, you could be entitled to early retirement due to ill health.
What is ill health retirement?
Ill health retirement allows you to start claiming your personal pension before the age of 55 (or the scheme’s retirement date) as a result of a health condition or disability that prevents you from working.
There’s also the possibility of receiving an enhanced annuity. This means that your regular pension payments could be larger than they would otherwise be.
Before we go into more detail about enhanced annuities and the application process, let’s first take a look at the conditions that qualify for ill health retirement.
What qualifies for ill health retirement?
Many health conditions and disabilities can qualify for medical retirement. The condition you suffer from could be physical or mental, provided that you are unable to do your job as a result.
There are some other general ill health retirement criteria. To qualify, you’ll typically need to show that:
- You have a physical or mental condition that means you can’t continue to do your job (or earn enough money to live off if you’re self-employed).
- Your condition is permanent, so you won’t be able to return to work in the future.
- There’s no medication or treatment that could improve your condition and enable you to do your job.
- You’re unable to work on a part-time or flexible basis as an alternative to ill health retirement (more on this below).
If these four criteria apply to your situation, then you should be eligible for medical retirement. That said, different pension schemes have different ill health retirement criteria – you’ll need to talk to your pension provider to find out if your condition entitles you to retire early.
Retiring with a terminal illness
You may be able to retire and take your whole pension pot as a tax-free lump sum if you suffer from a terminal illness and your life expectancy is less than one year.
You could be eligible for this if the following apply to you:
- You’re under 75.
- You’re expected to live less than one year due to a serious illness (and this has been confirmed by a doctor).
- You have a defined contribution pension.
- Your pension savings amount to less than £1,073,100 (the lifetime allowance).
- Universal Credit
- Council Tax Reduction
- Employment and Support Allowance (the replacement for Incapacity Benefit)
- Our simple guide to retirement
- An insight into the costs of retirement
- What to do if you haven’t saved enough for retirement
If you’re over the age of 75, you’ll have to pay Income Tax on the amount you receive.
It’s also worth noting that some pension providers will keep at least 50% of your pension pot to give to your spouse or civil partner – speak to your provider to find out about their approach.
Could I receive an enhanced annuity?
When retiring early due to a health condition that shortens your life expectancy, you could also be entitled to receive an enhanced annuity (sometimes referred to as an impaired life annuity). In this situation, the guaranteed income from your pension will be higher to take into account the fact that your life expectancy is lower than average.
It’s worth checking whether your condition entitles you to enhanced annuity. Many different health conditions mean that you can draw a larger income for your pension, as well as certain lifestyle factors like being a smoker. Your pension provider will be able to confirm if an impaired life annuity is possible in your case.
Check that you can afford to retire early
Before you make any plans to take ill health retirement, it’s a good idea to make sure that you can afford to retire early. Bear in mind that your pension pot may need to last longer if you start drawing from it at an earlier point than you’d originally planned.
You could carry out your own financial health check, working out how much money you’ve got to fund your retirement by adding up the value of your personal and company pensions, as well as any other savings, investments, and so on. Alternatively, you could ask a financial adviser to help with this.
What if I can’t afford medical retirement?
Should you decide that you’re unable to afford ill health retirement, there are other options to consider. For example, you could talk to your employer about the possibility of flexible or part-time working so you could continue to earn despite your condition.
If you have a disability or health condition, your employer must make ‘reasonable adjustments’ so that you’re able to work comfortably. You can make any reasonable request that would make it easier for you to continue working, including changes to your working hours and workplace.
Of course, you may have no option but to retire early if your health condition is so severe that you can’t work at all. In a situation like this, you may want to consider your finances carefully and start planning for retirement as soon as possible.
You could look for savings you can make to ease the transition into ill health retirement. Equally, you might find that you’re eligible for additional sources of income due to your health condition, such as Employment and Support Allowance (more on this below).
See our guide to planning for retirement for more helpful tips.
How to apply for medical retirement
Once you’ve checked that you’re eligible and can afford to retire early, you could then decide to submit an application for ill health retirement. The process differs depending on your pension scheme, so you should ask your provider to explain the ins and outs of their approach.
In general, your application to get medical retirement is likely to involve the following steps:
1. Contact your pension provider to find out if you’re eligible and ask for an ill health retirement application form.
2. Get medical proof of your condition. The application form will tell you what type of proof you need, whether this is a doctor’s signature on the form itself or a signed letter (some providers will ask for a more objective medical assessment).
3. Ask your employer to confirm that your health condition is the only reason for your retirement.
4. Fill out and submit the application form. As well as your medical proof and employer confirmation, you’ll usually need your National Insurance number plus information about your job and your condition.
When you hear back from your pension provider, they will either confirm your medical retirement, ask for more evidence, or reject your request.
What can I do if I’ve been refused ill health retirement?
If you have been refused ill health retirement, your pension provider must provide you with the reason(s) why. You’ll then be able to submit an appeal.
As part of your appeal, you might need to provide more information or evidence. Ensure that you send off your appeal form with all of the additional requirements before the deadline date set by your provider.
Can I get my State Pension early due to ill health?
No, you can’t claim your State Pension early even if you are eligible for medical retirement. You could be able to claim some other state benefits as a result of a health condition or disability, including:
Take a look at our guide to retirement ages to find out when you can start drawing your State Pension
Employment and Support Allowance
Employment and Support Allowance (ESA) replaced Incapacity Benefit. ESA provides you with money to help with living costs if you’re unable to work. The programme will also give you the support you need to get back into work if you’re able to.
To get ESA, you’ll need to have worked as an employee or been self-employed and have paid National Insurance contributions in the last two to three years.
To find out if you’re eligible and apply, visit the gov.uk ESA page.
Found this guide useful? You may want to read more of our retirement guides, such as:
Services you might be interested in
This guide has explained all of the key information about medical retirement, including the ill health retirement criteria, ensuring that you can afford to retire early, how to apply, and the other state benefits you could be eligible for.
At SunLife, we offer a range of services that could be helpful as you approach retirement age and beyond:
Visit these pages for more information or get in touch today to find out how we can help.