I’m a full-time carer for my mother – I want to take my work pension early

In our weekly series, readers can email in with any questions about retirement and pension savings to be answered by our expert, Rachel Vahey, head of public policy at investment platform AJ Bell. There is nothing she does not know about pensions. If you have a question for her, email us at money@theipaper.com. Question: I was made redundant and am now a full-time carer for my elderly mother and receive benefits. Could I take early retirement from my workplace pension on medical grounds and how do I find out what I’ll be getting? Shorts Answer: It sounds like you have recently experienced some big changes in your life and have some key decisions to make. Your options will, however, depend on a few factors. Generally, people can access their pensions from a minimum age of 55 (rising to 57 from April 2028). However, a few pension schemes have a higher minimum age, so it’s worth checking out whether this is the case for your scheme. Pension savers will often have a scheme pension age or retirement age under their workplace pension, for example age 65 or 67. This is the age pension schemes expect people to access their pensions. If you access your pension earlier than this age, then there may be a penalty. This is likely if you are a member of a defined benefit pension scheme that promises to pay an income based on how long you have worked at the employer’s and your salary. But it’s less likely if you have a defined contribution pension where you build up a fund from contributions and investment growth. If you are over your minimum age and want to take your pension, then your pension provider will be able to tell you how much your pension is. If a penalty is applied, you will need to decide whether any reduction in your pension benefits is worth being able to receive the pension early. It is possible, in some circumstances, to access your pension earlier than the minimum age through ill health early retirement. (This is also known as medical retirement or retirement on medical grounds.) You will be able to take up to 25 per cent of your pension tax free, with the remainder taxed as income. Usually, this may be available when someone retires early from the employment linked to the pension scheme. But even if you are not currently paying into a workplace pension you may still be able to take early ill health retirement. Whether you can will depend on the criteria set by your pension provider. The pension provider would need formal medical evidence that you are unable to continue your job. (Caring for an ill relative isn’t likely to be grounds for ill health early retirement.) Some pension schemes operate a stricter basis and may ask for evidence that you are unable to continue any job (for example a desk-based job). It’s therefore important to check out your situation with your pension provider. They will also be able to give you an early retirement quotation so you know how much you can receive. If you do have a defined benefit pension, then you may be able to access your pension without any normal early-retirement reduction. People can also take a pension early in cases of severe ill health when they have been given less than 12 months to live. In these cases, payments made before age 75 can often be tax free, though they will count towards the lump sum and death benefit allowance (LSDBA). Please don’t forget about your state pension. If you are caring for someone for at least 20 hours a week then you can claim Class 3 National Insurance credits, which will count towards your State Pension. (As a reminder you need 35 qualifying years for the full new State Pension.) The person you are for must receive a qualifying disability benefit such as PIP, Attendance Allowance or Disability Living Allowance. If you receive a Carer’s Allowance or Carer Support Payment, you will automatically get credits. Otherwise, you can claim these from the DWP. If you have any questions, get in touch with the Carer’s Allowance Unit on 0800 731 20297. If you’re receiving means-tested benefits – such as Universal Credit, Housing Benefit, income-related ESA and Pension Credit – taking your pension can alter your entitlement. (However, if you are receiving Carer’s Allowance this isn’t a concern.) So, it’s best to proceed with caution rather than taking your pension early just because you can.