If you’re thinking of retiring because of ill health or a disability, take time to consider your options. Work out what each one will mean for you financially as well as for your health and wellbeing, and get expert, independent financial advice if you need help to decide on the best course of action.
- consider all your options
- calculate how much income you’ll have if you retire early
- does your income cover your expenses?
- get expert independent advice
Consider all your options
Is flexible or part-time working a possibility?
If you’re disabled or have a health condition, your employer has to make ‘reasonable adjustments’ so that you’re not disadvantaged at work.
If you think you could continue at work if your employer made changes to your job, your hours or your workplace, then you can ask them to do so.
They have to act on your request as long as it’s reasonable. So, if you have MS or a mental illness such as depression read this for more information.
Weigh up the benefits of carrying on working
Remember to consider all aspects of work, not just financial ones, when making your decision.
If you’re able to work and supported to do so, the positive effects for you could include:
- Job satisfaction
- Better quality of life
- Improved emotional well-being
- continuing to be a member of any employer provided benefits such as life assurance, income protection, health insurance, or pension arrangement.
Voluntary redundancy versus early retirement
Maybe your employer has offered you redundancy as an alternative to early retirement?
Don’t be pushed into making a quick decision. Anti-discrimination laws mean you’re protected if you’re disabled or have certain health conditions.
For example, your employer must keep your job open for you and can’t put pressure on you to resign because you’ve become disabled.
If you’re happy to consider redundancy, make sure you weigh up all the pros and cons.
One advantage of taking redundancy might be the redundancy pay. Find out exactly how much you would get and whether you’d need to pay tax on it.
If you’re planning to use your redundancy pay as income, make sure you draw up an accurate budget to calculate how long it will last.
- go to the statutory redundancy pay calculator on the GOV.UK website
- use our Budget Planner.
- find out more in our guide Redundancy pay.
If you work in the public sector you might prefer to take redundancy in the hope that your condition improves and you’re able to return to work at some point.
This might not be possible if you opt for early retirement.
Speak to your union representative to find out exactly what your options are, or get advice from your workplace occupational health department.
Calculate how much income you’ll have if you retire early
Your workplace pension or your personal pension
You normally have to wait until you’re at least 55 before you can start getting your pension.
But if you have to retire early because you’re ill or disabled you might be able to get your pension earlier.
Each pension scheme has its own definition of ill-health, but usually it means you can’t do your normal job between now and the scheme’s normal retirement date because you’re physically or mentally ill.
Some schemes state that you have to be unable to do any job – not just your current job – to qualify for an ill-health pension.
To help you work out your income if you retired early, follow these three steps:
- find out from your pension scheme provider what their rules are and whether you can take the pension early because of ill health.
- ask your pension scheme or pension provider how much your pension would be on ill health grounds. It will be less because you are leaving before the scheme’s normal retirement date but some schemes are able to enhance the pension with additional years of membership in these circumstances.
- if you’ve been saving into a defined contribution scheme (where you pay into a pension pot which is converted into an income at retirement) then you need to see how much income your pension pot can buy. Because you have ill health, you can probably get an increased income known as an enhanced annuity. To find out more, follow the link below:
- make sure you claim everything you could be entitled to because of the extra costs associated with being disabled or having a long-term health condition. For example, Personal Independence Payment.
- check whether there’s any support you can claim to replace your lost earnings if you have little or no pension income – for example, Employment and Support Allowance.
- claim help with essential costs – for example, Housing Benefit.
- disability and sickness benefits – check your entitlements.
- where to get help and advice about benefits.
Find out when you can collect your State Pension
Your State Pension is payable from your State Pension age. It cannot be paid early on the grounds of ill-health. The state retirement age for men and women is currently 66.
Does your income cover your expenses?
Draw up a budget to find out how much you need to cover your regular outgoings.
This is an essential step when deciding whether you can afford to take early retirement.
Get expert independent advice
We recommend using a regulated financial adviser.
They are qualified professionals who can give you individual advice on the best way of converting your pension pot into your retirement income based on your circumstances.
You might also need to take financial advice if you’re in a final salary scheme, depending on how complex the scheme is.
This article is provided by the Money Advice Service.