Labour MP John Mann yesterday (19 December) presented to the House of Commons a Bill to require providers to pay pension benefits to people with ill health prior to their retirement age.
The proposals will be debated in parliament during its second reading, scheduled for 27 April 2018.
In a facebook post, Mr Mann said: “Should it become law, this Bill would require pension schemes to provide a lump-sum or ill health pension to those who provide evidence of a terminal ill health diagnosis.”
With the introduction of pension freedoms in 2015, savers with defined contribution pensions have the option to withdraw their funds from age 55, but not before.
HM Revenue & Customs data showed more than £14bn have been unlocked from defined contribution pensions since pension freedoms came into effect.
Mr Mann added: “Currently, there are some people who are below minimum pensionable age and who cannot work because of a terminal or degenerative condition.
“Since many pension schemes already use their discretion to make a pay-out, I believe the cost to the taxpayer and to schemes would be minimal.”
However, the Bill “would provide peace of mind to those who need it most and reduce any unnecessary uncertainty or delay in making a payment,” Mr Mann argued.
He added: “If you have saved for a pension, you and your family should have the security of knowing you will be able to draw on and enjoy this money.”
According to Andrew Tully, pensions technical director at Retirement Advantage, “many schemes currently do allow people in serious ill-health to take their benefits early”.
He said: “However making it a requirement for schemes to offer this may give people in this situation greater certainty.
“However, I think it is important it is simply an option for people to take rather than a benefit they have to take. There can be tax or other individual circumstances which mean, for some people, it may be the best option not to take benefits in this situation.”
Paul Gibson, managing director of Granite Financial Planning, agrees with the principle of the bill, since “no one could really argue that those suffering from serious ill health should be allowed access to pension benefits early”.
“I am, however, not aware of any cases where this has not been allowed so perhaps a change in the law is not necessarily required,” he concluded.
maria.espadinha@ft.com
