UK Government to Review Pension Access Rules for Terminally Ill

The Labour government and the Department for Work and Pensions announced a review of the rules that let people with terminal illnesses draw on their private pensions early. Treasury minister Lord Livermore said the current definition of "terminal illness" – allowing a tax‑free Serious Ill Health Lump Sum for those with a life expectancy under 12 months and aged under 75 – is "clearly outdated" and does not reflect modern medical outcomes.

The review will consider changing the definition to match the DWP’s standard, examine the varying requirements of private pension schemes, and seek a fairer, compassionate approach while guarding against later financial hardship. The existing rule permits tax‑free withdrawals up to £1.073 million for eligible individuals, with amounts above that taxed as income.