Can you take your pension early on ill-health grounds, and how is it taxed?
Ill health can allow a pension to be taken before the normal minimum pension age, and in a defined benefit scheme it usually avoids the actuarial reduction that early payment would otherwise attract. The tax treatment is unchanged: this is a concession on when you can take the money, not on how it is taxed.
- The test: medical evidence that you are incapable of carrying on your occupation.
- Defined contribution: the pot can normally be accessed before the minimum pension age.
- Defined benefit: the pension is usually paid without the standard actuarial reduction, and may be enhanced.
- The tax: unchanged — 25% tax free and the rest taxed as income.
01 What the condition requires
Access on ill-health grounds requires medical evidence that you are, and will continue to be, incapable of carrying on your occupation because of physical or mental impairment. It is a test about capacity to work rather than about a diagnosis, and it is assessed by the scheme on medical evidence.
For a defined contribution pot, meeting the condition allows benefits to be taken before the normal minimum pension age of 55, rising to 57 from April 2028. The pot is otherwise treated exactly as it would be at any other age.
For a defined benefit scheme the rules are the scheme's own, usually with tiers depending on whether you are incapable of your own occupation or of any occupation, and the more serious tier often carries an enhancement to service as well as the absence of a reduction.
02 The tax is unchanged
Up to 25% of the amount crystallised is available as a tax-free lump sum and the rest is taxed as pension income at your marginal rate, exactly as at any other age. There is no ill-health rate and no additional allowance.
The first payment will usually be taxed on an emergency code, as any first flexible withdrawal is, and has to be reclaimed. That is worth planning for where the money is needed for a specific purpose.
Taking taxable income also triggers the money purchase annual allowance, which matters where someone expects to return to work and resume contributing. Where the ill health is temporary, that permanent consequence deserves weighing.
Shows: the net amount from an early ill-health withdrawal after tax at your marginal rate. Ignores: emergency tax on the first payment, scheme enhancements, and the money purchase annual allowance.
On the defaults above, the worked example shows £51,000. £15,000 is tax free and £45,000 is taxed at 20% — the same treatment as at any other age.
03 What else to claim at the same time
Ill health that prevents work usually opens other entitlements, and pension access is rarely the first thing to claim. Employment and Support Allowance covers the work capability route; Personal Independence Payment is not means tested and is assessed on daily living and mobility needs.
Any employer income protection or critical illness cover should be checked before drawing a pension, because those benefits are often more valuable and drawing a pension can affect them. Group income protection in particular frequently pays until the scheme's retirement age.
Drawing a pension can also affect means-tested benefits, since pension income counts where a pot untouched may not. The interaction with benefit entitlement is worth establishing before taking the money rather than afterwards.
Source: Employment and Support Allowance
The concession here is on timing, not on tax, and that surprises people who assume ill-health access comes with relief attached. It does not — 25% tax free and the rest at your marginal rate, exactly as at 60. Two things to do before drawing anything. Check any employer income protection first, because group cover often pays until the scheme retirement age and drawing a pension can affect it. And check what drawing does to means-tested benefits, because pension income counts where an untouched pot may not.
FAQ
What is the test for ill-health access?
Medical evidence that you are, and will remain, incapable of carrying on your occupation because of physical or mental impairment. It is about capacity to work rather than about a particular diagnosis, and the scheme assesses it.
Is ill-health pension income taxed differently?
No. Up to 25% of the amount crystallised is tax free and the rest is taxed as pension income at your marginal rate, exactly as at any other age. The concession is on when you can take it.
Should I claim other benefits first?
Usually. Employer income protection often pays until the scheme's retirement age and can be affected by drawing a pension, and Personal Independence Payment is not means tested. Both are worth establishing before taking pension money.
Sources
Regulator references
- Tax on your private pension contributions · GOV.UK · 2025The relief, allowance and charge framework the whole post sits inside.Last verified: 2026-09-07
- Income Tax rates and Personal Allowances · GOV.UK · 2025The band boundaries every figure in this post is calculated against.Last verified: 2026-09-07
- Employment and Support Allowance · GOV.UK · 2025The work capability route and what it pays.Last verified: 2026-09-07
Calculator unit tests · the assertions this page's worked example is checked against, and their last result
Changelog
- 2026-09-07 — initial publish (new format)
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Jordan Reeves
Founder of Talk Through Wealth. A software engineer for over a decade before turning to retirement planning, Jordan built the projection engine after watching family members get fragmented, country-by-country advice that never reconciled. He writes about retirement the way the engine computes it: month-by-month, lifetime-long, and skeptical of any rule of thumb that hasn't been run through the math.