We at The Pensions Office have long since learned not to beat about the bush with enquiries from people who are in ill health. We now realise that words of sympathy are not what people want from us.

The fact of the matter is that some pension schemes offer much higher levels of death benefits than others – sometimes at no cost to the pension scheme member.

This is especially the case for members of final salary pension schemes, whether still working for the employer or having left many months or years earlier. Almost all of these schemes pay a pension to a surviving spouse following the death of the member but in most cases the value of those death benefits is much lower than those which would be provided if the member transfer his rights to a personal pension.

The Pensions Office frequently acts for pension scheme members who are in severe ill health or, unfortunately, terminally ill. On the one hand its sometimes not a nice task talking about it but the huge increase in value we are usually able to recommend dictates that we must act dispassionately in our efforts.

As an example, a client, suffering poor health, was approaching retirement age in a final salary scheme. He had accrued a pension promise of around £30,000 per annum. On his death his wife would receive a pension of half this amount, worth probably around £250,000 as a capitalised value. Following his wife’s death the benefit would stop altogether. The transfer value provided by the scheme was £700,000.

There were a number of options we needed to research, after discussing with the client his requirements. These included his desire for immediate income and future financial provision for his wife and, subsequently younger beneficiaries. Perhaps an impaired life annuity? (some insurance companies pay higher annuity rates for those in ill health). Perhaps a phasing in of pension benefits? Perhaps a pension income withdrawal strategy?

To cut a long story short, the client is now enjoying a large tax free lump sum payment, will leave well over £500,000 in a fund to provide for his wife following her death, there will be a huge amount of money to pass on to future beneficiaries. None of this would have happened if the client had left his benefits in his employer’s pension scheme.

There is no need to wait until retirement age before planning and following an exercise such as this; as soon as ill health develops you must, please…..