Pension Access Rules: Impact on Terminally Ill

Baroness Martin of Brockley Excerpts

Tuesday 30th June 2026 Lords Chamber

Asked by

[Baroness Martin of Brockley]

To ask His Majesty’s Government, in light of the ongoing pensions review, what assessment they have made of the impact of current private pension access rules on the financial security of working-age people living with a terminal diagnosis.

[The Financial Secretary to the Treasury (Lord Livermore) (Lab)]

My Lords, currently, individuals with a life expectancy of less than 12 months may take a serious ill health lump sum at any age, subject to medical evidence and scheme rules. This is tax-free below age 75, up to £1.073 million, after which it is taxed as income. However, while the current rules are intended to provide flexibility, the Government recognise that the permissive nature of these rules means that individuals may experience varying hurdles to access depending on their scheme. The Government wish to ensure a fair and compassionate approach to allowing access to pension savings in cases of terminal illness, and will, therefore, now consider this issue in further detail.

[Baroness Martin of Brockley (Lab)]

My Lords, I thank my noble friend for his Answer. It is encouraging to hear that the Government will look again at this important issue. The rules on access to private pensions for terminally ill people were designed for an era when terminal diagnosis often meant death within months, but medicine has moved on. For cancer alone, around one-half of patients now survive 10 years or more, compared to just one in four in the 1970s. Can the Minister confirm that, when the Government look at this issue, they will ensure that access rules reflect modern clinical reality rather than leaving people who may live for many years with a terminal diagnosis unable to access funds that are rightfully theirs?

[Lord Livermore (Lab)]

I am very grateful to my noble friend for her question. I agree with her that the current definition for when someone with a terminal illness can access their pension savings is clearly outdated and does not align with wider legislation, including the DWP’s standard definition, so I can confirm that the Government will now review this. Individual private pension schemes also have their own requirements for terminally ill people to access their pension savings. The Government will therefore also examine the access options across these schemes and will consider what changes may be needed to ensure that people have appropriate access while safeguarding against the risk of financial hardship later in life.