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Terminal Illness: Early Access to Pensions

Volume 732: debated on Tuesday 2 May 2023

I beg to move,

That this House has considered early access to pensions for people with a terminal illness.

It is a pleasure to serve with you in the Chair, Mr Sharma. In the United Kingdom, it is not possible under any circumstances to access a state pension before retirement age—not even if a person has paid national insurance contributions for the full 35 years, is terminally ill, and have less than a year to live. The purpose of the state pension is to support all of us towards the end of life, at a time when we are less capable or incapable of work, yet people with a terminal illness, who are nearing the end of life and, in the majority of cases, are no longer able to work, are not entitled to draw on their state pension, regardless of their contributions, financial difficulties or personal or family situation.

Terminal cancer patients who have surpassed their life expectancy have been told by firms such as Legal & General that they are ineligible to access their pension early because they may live longer. People are being punished for defying their life expectancy. Does the hon. Gentleman agree that people with a terminal illness should be given the dignity and respect of being able to access their own pension early?

I absolutely agree. Dignity and respect is at the heart of that ambition, as she so clearly articulates.

I start the debate with an appalling statistic. More than a quarter of people who die before retirement age spend their final days in poverty. In my Angus constituency, that figure is 24%. It is awful to think that for so many people with terminal illness, their last days are filled with worry and fears that go beyond the illness with which they have been diagnosed. Marie Curie reports that many terminally ill people feel stress about keeping a roof over their head, paying for their children’s school uniform or the energy use of their specialist medical equipment. As far as possible, the last days of life should be spent surrounded by friends and family, making happy memories in comfortable surroundings.

My constituent Ian Bain, from Forfar, was diagnosed with motor neurone disease in 2014. Mr Bain worked his entire life. He started work in 1977, and accrued 41 years of national insurance contributions—six more than necessary to entitle him to a full state pension on retirement. When he stopped working due to illness, there was no way for him to access his state pension, because he was not yet 65. Due to Department for Work and Pensions delays, he also did not receive any social security payments until nine months after applying. Mr Bain was not entitled to claim under the special rules, as he had been advised that he had more than six months left to live. When he did eventually start receiving payments, he received them only at the lower rate of the personal independence payment and employment and support allowance.

Although Mr Bain had been diagnosed as terminally ill by a medical practitioner, he was required to return annually for follow-up assessments to see if his incurable degenerative condition had improved. He was even informed by one assessor that he “looked well”—cold comfort if ever there was. It was only in 2021 that Mr Bain started receiving the higher rate, when he was moved to the Scottish Government’s adult disability payment. Mr Bain can no longer speak to me on the telephone and has to use a single finger to email me. He should not face the indignity and stress of continually having to jump through bureaucratic hoops for a pittance, while the pension that he has so completely paid into for decades is denied to him by the tightest of all fists.

Sadly, Mr Bain’s situation is far from rare. Another Angus constituent, Ross, told me that his father

“died of cancer in 2019 just 2 days before being able to draw on his pension, he had spent his whole life working. He paid his contributions religiously from the day he was able to work and got nothing back.”

My constituent Malcolm advised:

“When you hear someone tell you that you have cancer, you immediately think you are going to die. That thought automatically triggers the need to make sure for the provision for your loved ones. The only thing we should have to deal with is building up happy memories for those left. This is more difficult when money is in short supply due to escalating costs.”

Another Angus constituent said that her husband died of a glioblastoma

“4 months before he retired. He worked his entire life and was never off sick or claimed benefits once. Once he was diagnosed I had to battle to get assistance. He should have been able to access his state pension early.”

It would have made all the difference. She continues:

“it would have helped with the financial strain.”

Access to funds for the terminally ill is a problem across these islands. People are twice as likely to die in poverty if they are terminally ill and under 66 years of age. The reasons for this poverty are well understood. People with terminal illnesses very often cannot work. Two thirds of terminally ill people rely on benefits as their main or only source of income. At the same time, costs can often increase dramatically at the end of life. The additional cost of terminal illness can reach up to £16,000 a year. There is often a need for energy-intensive specialist medical care in the home. Many people need to keep their home warmer, and their energy bills increase dramatically. All of us in the United Kingdom are exposed to inflationary pressure and sky-high energy costs, but for the terminally ill, the situation is permitted to become even more dire.

The Scottish Government have acted to mitigate some of the financial and bureaucratic pressure on those experiencing terminal illness. Scotland is introducing its own extra costs disability assistance benefit, having already introduced the child disability payment and adult disability payment, which replace the disability living allowance and personal independence payment. It is working towards the introduction of a further payment to replace the attendance allowance.

The Scottish Government have also changed the definition of “terminal illness” used to allow access to benefits from the 12-month special-rule definition used in England to an indefinite definition that includes all people diagnosed with a terminal illness. This allows people to be fast-tracked to receive the highest rate of payment as quickly as possible, and for longer. The central principle of the approach is to ensure that terminally ill people are provided with the support that they need, when they need it. That approach represents nothing more than the dignified acceptance of a terminally ill person’s circumstances. It is simply doing the right thing. Those changes are welcome and will do much to improve the experience of those with a terminal illness living in Scotland, but the fact remains that their state pension is kept from them, no matter how long they have paid into the system. The Scottish Government have no power to intervene when it comes to that injustice.

People with terminal illnesses have often paid enormous amounts of national insurance. On average, people aged 20 to 64 who are in their last year of life have accrued 24 years of national insurance contributions, and will never see the benefit of that investment, yet the path to improving the situation is straightforward and affordable. France, Germany, Italy and Spain all provide for early access to the state pension in the event of disability, and for those found to have a terminal illness.

Research conducted by Loughborough University found that giving working-age terminally ill people access to their state pension could almost halve the rate of poverty in that cohort, lifting more than 8,600 people a year out of poverty at the end of their life. That change would be not only effective but extremely affordable. It is estimated to cost £144 million per year—just 0.1% of the annual state pension bill—and would make an immeasurable improvement to the dignity and life of some of the most vulnerable people in our communities, and their families. It is also fair. People pay into a state pension their whole life to ensure a comfortable end of life, but when they reach end of life, the UK Government tell them that they will keep the money. How can that be? To put it another way, the UK Government are saving £144 million per year by withholding access to state pensions from terminally ill people. That is unconscionable.

Members not just from my own party but from across the House have asked the UK Government to consider permitting terminally ill people to access their state pension, regardless of age. Many Members in this debate and beyond fear that the Minister’s response will echo previous Government responses—that she will say that terminally ill people already get access to benefits, or that those in their final years of life will have their applications fast-tracked. Those measures have failed to avoid the extraordinarily high rates of poverty among the terminally ill, they do very little for those diagnosed as having more than 12 months to live, and they are clearly insufficient in supporting people during what can be one of the most devastating and frightening periods of anyone’s life.

I hope that the Minister will give this humane and decent aspiration the due consideration it deserves, and that the Government will change the rules for terminally ill people not just in Angus but across these islands.

It is a pleasure to serve under your chairmanship, Mr Sharma. I wish that more Members had attended this very important debate so that I could sum up some more contributions, but I thank my hon. Friend the Member for Angus (Dave Doogan) for securing it and delivering a powerful speech in which he entreated the UK Government to act with compassion. It is vital that terminally ill people are finally given the respect they deserve in UK Government circles.

When terminally ill people get their diagnosis, they are absolutely devastated, and so are their families. It is a situation that none of us wants to face, and nor do we want members of our family to face it. It is absolutely devastating, and grief kicks in immediately. That is just one of the pressures facing terminally ill people and their families, which my hon. Friend laid out.

Terminal illness puts an emotional, mental and financial strain on the individual and their family. More than four in five families living with advanced cancer face income losses as a result. Does the hon. Gentleman agree that allowing early access to pensions will enable people with terminal illness and their families to focus on the quality of their end-of-life experience and not worry about money?

The hon. Lady is absolutely right. This should be about making the people who are facing this most dreadful situation and their families as comfortable as possible and helping them to move forward. The cost is small, although as my hon. Friend the Member for Angus said, by not paying out the £144 million a year, the UK Government are running a lottery; they hope to get that dividend in from people. That is a small amount for dignity and fairness for the people in that situation and their families.

My hon. Friend shared the damning statistic that terminally ill people are twice as likely as others to die in poverty. They have bigger costs; it costs more to be terminally ill. For a start, they are ill, and most are homebound, which increases energy costs. There is the cost of the adaptations that they have to make, and increased costs for their families, who have to visit more to provide support.

The issue should be very simple for the UK Government. I am chair of the all-party parliamentary group for terminal illness, and although our entreaties about the six-month rule were listened to—on every occasion, Ministers said, “Yes, we must do something about this”—the change to 12 months took years in which thousands of people died waiting. I welcomed the change from six months to 12 months because it made life marginally more easy for people, but the fact that the effect is marginal—the very minimum that could be done for terminally ill people—is the most damning thing about this. As has been stated, this is about fairness and dignity, and people’s ability to have a quality end of life. The power is with the UK Government to make a very simple and fair adjustment. As has been underlined, in the scale of things, the cost is small, but the scale of the impact on the lives of people who are terminally ill and their families is enormous.

Nobody is asking for things that people have not earned; these pensions are something that people have earned throughout their lives. The Government can look at it this way: when someone gets that devastating note that says they are terminally ill, the Government know they will save money from the fact that that person is not going to be around for years collecting their state pension. Therefore, the Government can at least make this gesture towards making people’s lives easier. Why do we not see more compassion from the UK Government over this very simple matter? People are dying; why not treat them the way they should be treated? Why not strain every sinew and make every move to ensure that people in this situation have the best possible end of life? It is one thing that all of us could achieve by working together, and that the UK Government could commit to.

We heard about the tragedy of Mr Bain, a constituent of my hon. Friend the Member for Angus, who spent 41 years paying into his pension. He earned it but he is not going to get it. Think of my hon. Friend’s other constituent, Malcolm, who is quoted as saying when his diagnosis of cancer came in, “You immediately think you are going to die.” Of course he thought that, with that diagnosis. People are going to die; the problem is that, with the best will in the world, doctors cannot put a definitive timescale on when. However, they can often say that, “You are going to degenerate and your life is going to get more difficult as you go towards the end of life.”

This is a simple act. State pensions are reserved to the UK Government, so only they can act on this for people in Scotland and the other nations of the UK. Other nations can, as we have heard, make provisions like this; they can do the right thing for people. My hon. Friend the Member for Angus laid it out very clearly, but I will say it again: this is not a mammoth choice, and it is not going to destroy the UK budget. It is a small step that, along with other measures, should be taken to assist people who are terminally ill and their families.

When the Minister sums up the debate and answers our questions, I ask her not to just give out platitudes and promises of long-term action, as we have heard so many times before from so many other Ministers in the UK Government. I am not saying she will do that, but I believe the debate deserves answers on how she will take the issue back to her Department and work out a proper plan for people who are terminally ill and their families, so they can have the dignity, respect and fairness they deserve. She can give a reassurance that she will fight tooth and nail to get state pensions released for people who are terminally ill.

It is a pleasure to serve under your chairmanship, Mr Sharma. I thank the hon. Member for Angus (Dave Doogan) and colleagues from across the House who have contributed to this important debate. I hope the Government will take this issue seriously and find ways to improve the lives of people with a terminal illness.

I am pleased that legislation was passed last year to support people with a terminal illness in having fast-track access to benefits. I hope that we can develop a consensus on other matters, including the related issue we are discussing today, but I would sound a note of caution following on from the debate last September on the Social Security (Special Rules for End of Life) Act 2022, where the House worked together to allow people in the last years of life to receive increased benefits. One of the challenges raised at the time was whether the Government were able to deliver on their promises, given the series of failures over the last decade. I hope that the Minister will ensure that DWP runs smoothly and that the errors we have seen in some aspects of the pensions and benefits system will be addressed, so that the people in that greatest need are protected. I ask the Minister to reassure Members that the Department will be able to provide individual pension savers and people in need with the level of service they would expect.

On the substance of the debate—early access to pensions—I want to cover two aspects in my speech: the issue of occupational pensions, and then the issue of access to the state pension, which the hon. Member for Angus mentioned. Occupational pensions play a very important role in allowing constituents to save for their retirement, and it is only right that people who have saved all their lives and contributed to the system should be able to access the money that they have saved. I understand that people with less than a year to live are already able to withdraw their entire pension in some cases, and a substantial amount in other cases, and even those who are younger may be able to take advantage of that facility through the pension freedoms that are normally available at the age of 55. I ask the Minister to reassure Members about her work with the pensions industry to develop this further, so that we can have a further discussion and perhaps gain further understanding of the possible ways to support people. Given that a great deal of many constituents’ income in retirement does not come from money that is saved through occupational pensions, it is very important that the money that people have saved is available to them at their time of need.

On the state pension, I want to put on the record my thanks to Marie Curie and other campaign groups for raising this issue. It is very important that we listen to the voices of those campaigners, and I am grateful to the hon. Member for Angus for securing the debate so that we can discuss them. I understand that the Government’s current position is not to allow early access to the state pension. I would be very grateful if the Minister confirmed that that and set out the evidence on which the decision is based. I am sure that the Department will have explored the issue in detail, and I ask her to consider publishing some of the research carried out by the Department on this matter, so that we can understand it better and have a fuller debate in future.

I want to take this opportunity to raise some other points that have been made by campaigners. I am worried by some of the research that outlines the scale of the problem that energy bills can cause those facing the awful diagnosis of terminal illness, and I am grateful to the hon. Member for Angus for mentioning that point. For example, research by Marie Curie explains that after a terminal illness diagnosis, energy bills may rise by as much as 75%. I think I heard the hon. Member refer to some of the additional medical needs, the need for greater home heating and sometimes the need for expensive equipment, such as oxygen tanks, in a person’s home. It is very important that we understand that, take it into account and see the wider needs of somebody facing an awful diagnosis and suffering a terrible challenge.

There is a lot of independent research on the consequences of living in damp, under-heated properties, which we should also bear in mind when we consider this issue. For example, the World Health Organisation estimates that about 30% of excess winter deaths are directly attributable to living in cold, damp environments, and we have to take that point into account, as well as the additional cost of heating for medical reasons and of paying for additional energy to support machinery. That is why it is really important that we take steps to reduce energy bills in a sustainable and long-term way. As the official Opposition, we are calling for energy bills to be cut for good, which should obviously start with a proper windfall tax on oil and gas giants, continuing with our long-term mission to make Britain a clean energy superpower by 2030.

Campaigners have highlighted other financial and family impacts of having a terminal illness diagnosis, and one difficult challenge faced by some families is that other forms of support may not be available to them. For example, access to paid childcare may diminish as a result of not being able to work, although a family may still need it.  I would like the Government—I hope the Minister will address this in her speech—to look at not only reforming the childcare system in broad terms but addressing the specific issue faced by those who have a family member with a terminal illness diagnosis. They should look at the need for childcare at that difficult time and at the unintended consequences of some aspects of Government policy. There is a need for wider reform because, sadly, families, children’s education and our economy are paying the price for our current childcare system.

To conclude, I hope the Government will respond and continue to work with the pensions industry. I look forward to the Minister answering my questions about her work with the industry, confirming Government policy on the state pension and committing to publish suitably informative material about the research carried out by the Department.

It is a pleasure to serve under your chairmanship, Mr Sharma. We have been discussing a very sensitive issue, and I thank the hon. Member for Angus (Dave Doogan) for bringing forward the debate, and all hon. Members for their contributions.

The Government remain committed to ensuring that all citizens can live with the dignity and respect they deserve. I think it would help if I first set out the principles behind the state pension, which is the foundation of state support for older people. In 2016, the system was reformed, with the introduction of the new, simpler and more straightforward state pension as the basis for private saving, to which people can add throughout their lives.

The state pension is a contributory social benefit, financed through the national insurance fund. The national insurance system operates on a pay-as-you-go basis, meaning that today’s contributors are paying for today’s social security entitlements and pensions, while those who paid contributions in the past were paying for the pensions of that time. In other words, the contributors to the national insurance system do not accumulate an individual pot of money that is personal to them.

People’s national insurance contributions do not just pay for the state pension. They also entitle them—or, in certain circumstances, their spouses—to contributory social security benefits such as unemployment and bereavement benefits, which are available on the basis of the rules applicable at the time the claim is made, and about 20% of national insurance contributions are paid into the NHS. Therefore, it is a question not so much of a person paying for their own benefits, but of a general pooling of resources to meet current benefit claims for all those covered by the national insurance system.

A person’s contributions are geared towards liability to pay rather than any likelihood of future benefit entitlement. In that sense, it is similar to income tax rather than a private insurance or pension scheme. It has always been an overriding principle of the national insurance system that liability to contribute exists, whether or not those contributions will eventually give entitlement to a particular benefit. That is very different from private pensions, where a person builds up a pool that is specifically theirs, and where different laws rightly exist.

Therefore, early access to a state pension would not be appropriate in the case of terminally ill people, but there are a variety of other benefits available to them. For those nearing the end of their life, significant support is already available through the welfare system. Hearing that an illness cannot be cured must be a frightening and devastating experience, and I pay tribute to the hon. Member for Inverness, Nairn, Badenoch and Strathspey (Drew Hendry) for all his work on that with the APPG. Our priority within the DWP is providing people with financial support quickly and compassionately. The main way we do that is through the special benefit rules, which have been mentioned today and which are sometimes referred to as the special rules. They give people nearing the end of their life faster and easier access to certain benefits, without their needing to attend a medical assessment or serve waiting periods. In most cases, people will receive the highest rate of benefit.

Changes to the special rules mean that thousands of people nearing the end of their life will be able to claim fast-tracked financial support from the benefits system six months earlier than they were able to previously. Historically, people had to be assessed by their healthcare professional as having six months or less to live. That is known as the six-month rule, which the hon. Member for Inverness, Nairn, Badenoch and Strathspey referred to. In July 2021, the Government announced that they intended to replace the six-month criteria with a 12-month, end-of-life approach. Last April, the Department made those changes to the special rules for eligibility for universal credit and employment and support allowance. In April 2023, the Department made similar changes for PIP, disability living allowance and attendance allowance. Those changes have been welcomed—as they have been today—by the key charities active in the area, by the public and by parliamentarians.

I will now expand on my earlier remarks on early access to state pension. Unlike a personal or workplace pension, which can potentially be drawn earlier, it has always been the case that nobody can claim their state pension before they reach state pension age. There are a wide range of working-age benefits available to support people who are below state pension age . Removing the clear boundaries between working-age and pensioner benefits would create complexity and confusion. This is not simply a monetary issue.

As an example of the complex issues relating to early access, the value of an individual’s state pension is based on their contribution record. Is the intention here to base it on the contribution record of those who are, sadly, at the heart of today’s debate? If the value of that state pension, based on the person’s record, is deficient, would they be entitled to means-tested pension credit? If they took their state pension early, would it need to be actuarially reduced to reflect that? Early access actually means lowering the age of entitlement to state pension. At what age would it be set for this group? Would it be 16, in line with the age—

I appreciate the Minister’s position, but I am not sure that many people who are terminally ill, or those who work with them, will be comforted by the technicalities she is laying out. She is laying out the rules as they stand, but does she see no opportunity for things to be adjusted so that the entitlement age for those who are terminally ill could be adjusted, as it is in other countries? Is there no opportunity or intention for the UK Government to look at that?

The Department’s position is that help is available through benefits other than the state pension. The state pension is not an entitlement pool that exists; it is done on a pay-as-you-go basis. Of course, it is different from private pensions, which I will come to in a second, and there is more that we could do on that front to make the situation easier and more straightforward.

I of course accept the sentiment on which this proposal is based—that those who are terminally ill should be financially supported—but grounding this support on the state pension system, because it is there, does not make for a practical proposition, and that is in addition to my earlier points on the nature of the state pension.

Hon. Members will be aware that the second Government review of state pension age was published on 30 March 2023. The Government noted the independent report’s recommendations on the rise from 67 to 68, but highlighted that Baroness Neville-Rolfe was unable to take into account the long-term impact of recent significant external factors, bringing uncertainty to the data on life expectancy, the economic position and labour market.

I raise that point because, as part of that process, independent reviewers looked at early-access policies that would allow variation in state pension age for certain groups. John Cridland covered that in his 2017 independent review of state pension age. More recently, Baroness Neville-Rolfe, in her independent review, recommended that the Government should look at such a scheme for people who had spent long periods of their lives doing physical work.

However, both reviewers recognised the real, practical difficulties of designing and delivering such a scheme. We are aware that when and why people leave the labour market will vary and will be affected by a host of factors, including their national insurance record, savings, health, caring responsibilities and other factors. It would be impossible to take account of all those factors in setting the state pension age or to create rules for one particular group that would be fair to others. In addition, the Government are mindful of the fact that a universal state pension age has many benefits, including giving a clear signal to those planning for retirement.

Private pensions are very different. Through automatic enrolment, we have extended pension saving, so more individuals will have access to choices at retirement, with more than 10.8 million people automatically enrolled into a workplace pension as of March 2023. If someone has a defined benefit private or workplace pension, they may be able to begin taking an income and/or lump sums from their pension at any age due to ill health. That provision is dependent on the rules of the scheme.

In addition, the generous tax benefits of saving into a defined contribution pension provide individuals with the ability to accrue savings for their retirement and provide them with freedom and choice about how they access them. Individuals can normally access those savings, without penalty, from age 55. However, to address the point made by the shadow Minister, the hon. Member for Reading East (Matt Rodda), they may be able to access their pension as a lump sum from any age if the scheme administrator has received evidence from a registered medical practitioner that the member is expected to live for less than one year.

The hon. Member for Rutherglen and Hamilton West (Margaret Ferrier) raised a specific example of where there were difficulties. I would be grateful if she would write to me about that, and we can see whether there is anything we can do to help.

The hon. Member for Reading East raised some points on energy. The energy price guarantee has been extended for an additional three months at its current level, from April to the end of June. That will bring a typical household energy bill for dual-fuel gas and electricity down to around £2,500 per year in Great Britain and around £2,109 per year in Northern Ireland.

In conclusion, I have set out the range of support that the Government provide for people with terminal illnesses. Although I of course have the greatest sympathy for anyone in that position, the Government do not believe that adjusting the state pension system to support that group is the right approach, although early access to private pensions is obviously a different matter.

Thank you very much, Mr Sharma. I thank all hon. Members for their contributions to this important discussion. I am disappointed, if I am honest, that so much of the oxygen in the room has been devoted to private pensions. There is a fundamental—and, dare I say it, fundamentally clear—distinction to make between private pensions and state pensions. People in the workplace have a choice over whether to take out a private pension or not; they do not have a choice over whether to pay their national insurance contributions. I would suggest—respectfully—that that is a fundamental, fairly obvious difference between private and state pensions.

In her summing up, the Minister talked about the pay-as-you-go nature of national insurance contributions. I think that most of us, as Members of Parliament, already understand that there is no national insurance pot and that national insurance is, in effect, a distinct version of general taxation.

My hon. Friend is making a point about the state pension and the mechanics that have been described. However, this situation—where there is no specific pot—is the same in other countries, such as Australia and Canada, which do allow early access to the state pension. There is no difference in the mechanism for it, or indeed the principle behind it; they have just applied the compassion that is missing in this situation. Does my hon. Friend not agree?

I agree entirely. A narrative has been advanced this afternoon that, because this does not happen, it cannot happen. But, of course, if we want to make it happen, it can happen. As my hon. Friend points out, that is the case in other jurisdictions that have more cognisance of, and respect for, not just the fiscal elements, but the social contract that exists between society, individuals and the Government that seek to represent them.

I think the point the Minister made in her summing up was that it has never been possible to draw down a state pension early. Well, I think we know that too. What we are seeking to debate here is that that is not a cogent or sustainable position and that the Government should therefore introduce legislation that makes it possible—in very distinct and challenging circumstances —to draw down that state pension early.

Of the range of reasons or excuses for not doing what has been proposed, I would suggest that “introducing complexity to the system” will fall on fairly stony ground with people who have been diagnosed with a terminal illness. I am sure they would imagine that a bureaucracy the like of which the UK has at its command could sufficiently marshal the resources to tackle the complexity of a very distinct change to the state pension regime to allow them the dignity they sorely deserve.

The benefits system was also talked about a lot this afternoon. Well, again, a bit like private pensions, that issue is distinct from this one. Those state benefits—whether personal independence payments or employment and support allowance—are a function of the person’s or underlying health, whether or not they have been diagnosed with a terminal illness. As every hon. and right hon. Member can attest, many case studies show that those lumbering regimes take a long time—too long—to come to fruition, and they do not recognise the fact that, whether there is a pot there or not, those people have substantively contributed to a system that, in their time of need, has abandoned them. I respectfully suggest to the Minister that she and the Government really should think again.

Question put and agreed to. 

Resolved, 

That this House has considered early access to pensions for people with a terminal illness.

Sitting adjourned.