Greater Manchester Mayor Andy Burnham, now Labour Prime Minister, faces mounting pressure to overhaul pension rules that penalise terminally ill savers trying to access their retirement funds. Under current legislation, savers who withdraw more than a quarter of their pension pot in a single year face an additional 15 per cent tax charge, bringing the total tax burden to 55 per cent. Campaigners argue that advances in medical treatment have made it increasingly difficult for doctors to predict whether someone has fewer than 12 months to live – the threshold that currently determines access to special tax treatment.
Outdated Definition Creates Financial Hardship
Baroness Finlay of Llandaff, a crossbench peer and professor of palliative medicine, highlighted the cruel impact of financial stress on those with limited time. “Those of working age who are terminally ill have particularly pressing expenses, both for care and in preparing their families, often where there are children, for the future they face in bereavement. Financial stress is cruel, making all this far more difficult,” she said. The call for reform has cross-party support, with Conservative peer Baroness Penn stating: “We need clear, fair and consistent rules for access for people who find themselves faced with a terminal illness, it's the least they deserve.”
Political Consensus Behind Reform
Liberal Democrat peer Baroness Leaman added urgency, saying: “A terminal diagnosis is already the worst luck imaginable, people should not then be subject to a second lottery on top of it. The right to access your pension when you are dying should be a right, not a discretion. What is needed is now pace. The Government must treat this as the urgent, tractable problem it is.” Labour peer Baroness Martin of Brockley acknowledged the problem within government ranks: “I agree that the definition for when someone with a terminal illness can get their pension savings is clearly outdated and does not align with wider legislation so the Government will now review this.”
Charities Highlight Human Cost
Ross Cooke from Macmillan Cancer Support underlined the real-world impact of delays and barriers. “For people living with terminal cancer delays and barriers to accessing financial support can have a significant impact on their quality of life, adding to the emotional and practical challenges they are already facing. Everyone with a terminal illness should be able to access the financial support they're entitled to quickly, simply and with dignity,” he said. The government’s review is expected to examine aligning the pension definition of terminal illness with the broader legal definition used in other benefits, which may not require a strict 12-month prognosis.
The pressure on Burnham comes as part of a wider campaign to simplify access to financial support for the dying. Critics argue that the current system forces those with limited life expectancy to choose between paying heavy taxes or navigating complex exemptions that are often inaccessible to people already dealing with hospital appointments and care needs. Any change would require primary legislation, but with cross-party support and public sympathy, ministers are likely to fast-track a consultation.
