Pensions

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Basically pensions are a form of saving for retirement, with certain tax advantages on contributions. When someone retires, or reaches a certain age, a pension scheme pays a regular income for life. The sooner someone starts paying into a pension the higher their income in retirement is likely to be.

There are three main types of pension: state, personal and company.

State pension

If someone is working they usually build up the right to a basic state pension and possibly an additional state pension, depending on the amount of National Insurance contributions they have paid.

Personal pension

Personal pensions are available from banks, building societies and life insurance companies, who invest savings on your behalf. When someone retires, they can take a tax-free lump sum from their fund and use the rest to provide an income – usually in the form of a lifetime annuity (a payment made each year for the rest of your life).

Company pension

These are also called occupational pensions. They are set up by employers to provide pensions for their employees on retirement. If someone is able to join one, it’s worth considering as most people will be better off in retirement than if they had not joined.

Company pension schemes usually require a regular contribution straight from the employee’s pay packet based on a percentage of their salary. The payment is taken before they pay tax on their salary – hence they get tax relief on pension contributions.

Pensions and HIV

Generally health status does not present an issue when setting up a pension. However both personal pensions and company schemes may offer a death-in-service benefit (a form of life insurance) within the scheme. Therefore the same underwriting issues apply as those encountered when applying for life insurance by itself. If necessary, ask if the employer can separate the death-in-service benefit from the pension itself.

Some HIV-positive people might not see the point in having a pension if they think their life expectancy has been curtailed by HIV and that they won’t be able to access pension funds until age 50 at the earliest. But this is a misconception because improved treatment has led to increased longevity, and more and more people are able to benefit from pension planning and the tax relief this gives. Furthermore, even if their health were to deteriorate, then there are many circumstances when they may be able to access the benefits early.

Retiring early

If someone is ill and they have a personal pension, they can apply to take early retirement in some circumstances. In this situation they would take out the fund as it stands (together with any tax-free cash they would be entitled to take). They will then be able to apply to an insurance company for an ‘impaired life annuity’. It essentially means that they should get a greatly enhanced pension income, at a younger age, as a result of their diagnosis.

If someone is entitled to an occupational scheme and have had to stop work due to ill health, they are entitled to apply to the trustees of the scheme for early retirement on grounds of ill health. In this situation the scheme will work out what they would have been entitled to, had they been able to work until retirement age, and pay out that amount straight away, annually.

Some local authority or government pension schemes will enhance an employee’s service if they retire early due to ill health and calculate their pension using additional years of service. This can make a significant difference to the amount of money received each year.

This content was checked for accuracy at the time it was written. It may have been superseded by more recent developments. NAM recommends checking whether this is the most current information when making decisions that may affect your health.