Money Advice Service

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.

Consider all your options

Is flexible or part-time working a possibility?

If you’re disabled or have a health condition like MS or depression, 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.

Find Support to help you keep your job when ill or disabled

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, and
  • Improved emotional well-being

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.

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 or 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 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 3 steps:

  1. Find out from your pension scheme provider what their rules are and whether you can take the pension early because of ill health.
  2. Ask your employer or pension provider how much your pension is worth.
  3. 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:
Read our guide on Higher pension income for people with ill health

Other income

  • 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

The state retirement age for men is currently 65, rising to 66 in 2020. For women it’s over 61, gradually rising to 65 by 2018, and 66 by 2020.

Find out how to get a State Pension forecast on the GOV.UK website.

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.

Use our Budget planner to find out how much you need each month and look at where you could cut back if necessary.

Get expert independent advice

We strongly recommend using a 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.

Learn more on Choosing a financial adviser

This article is provided by the Money Advice Service.