Jurisdiction(s):
United Kingdom

Related legal acts

Key definition

Serious ill-health lump sum definition

What does Serious ill-health lump sum mean? A serious ill-health lump sum is a one-off payment from a UK registered pension scheme when a member is terminally ill and needs to commute pension rights into cash. In UK pensions tax law (Finance Act 2004), it is an authorised lump sum. The scheme administrator must hold medical evidence from a registered medical practitioner that the member’s life expectancy is less than 12 months. It can only be paid in respect of benefits not yet taken (uncrystallised rights) and payment must extinguish the member’s rights under the relevant arrangement. It must be paid before the member reaches...

Serious ill-health lump sums in UK registered pension schemes: conditions, tax treatment (including age 75), post-2024 allowance interactions, calculation, contracting-out, death benefits and HMRC reporting

Published by a LexisNexis Pensions expert

Practice notes

If a member is expected to live for less than one year (described as ‘serious ill‑health’), and certain requirements are met, a scheme administrator may commute any pension rights that member holds within the scheme and instead pay the whole benefit due under an arrangement as a lump sum. In statute this type of authorised member payment is termed a serious ill‑health lump sum.

Conditions for payment of a serious ill-health lump sum

Current conditions

Under the Finance Act 2004 (FA 2004), Sch 29, para 4, a scheme administrator can pay a serious ill‑health lump sum to a member only where the following conditions apply:

Before payment, the administrator has received evidence from a registered medical practitioner confirming the member is expected to live for less than one year. A ‘registered medical practitioner’ means a person registered under the Medical Act 1983 or, if the seriously ill member is overseas, a person with equivalent overseas qualifications.
From 16 September 2016, the payment must extinguish all uncrystallised rights under the arrangement. In broad terms, ‘crystallising’ benefits is the process of accessing pension savings.

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Web page updated on 21/05/2026

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