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Adviser insight: Unlock pensions for clients who face an early death

by George Emsden on Jul 29, 2009 at 00:01

A case study of a client who had terminal cancer highlights the dearth of information about the options for people who are terminally ill to free up cash in pensions early to use while they still can, writes George Emsden of in2 Consulting.

Guy is in his 40s, has no children and works in the City for a large bank. He is starting divorce proceedings and money has been agreed. With a large house, the choice is: sell the house and give his spouse half or raise a mortgage for her share and stay put. Key facts illustrations are produced, which he takes away, and couple of days later he phones to say he wants the mortgage option.

Although the application is done, the fact find shows two paid-up executive pension plans from his earlier self-employment, and no income protection or critical illness cover.

The quote for a £300,000 critical illness policy to cover the mortgage is more than £300 a month, but he later calls to say he can get critical illness cover for about £90 a month via his employer’s group benefits scheme.

I have not seen any illustration but, at that price, I suggest he might as well buy the maximum.

Bad news is broken

The mortgage takes months to complete but there is no contact from the client. My letters and phone calls go unanswered.

I check with the human resources department at his workplace and they tell me Guy is not at work so I phone his home number once more. He answers and after the usual pleasantries, blurts out: ‘I have terminal brain cancer.’ I suggest we meet either at his home or my office.

He comes to my office and brings me up to date. He says it started with headaches and feeling unwell and then one day at work he just lost it and was told to take time off.

His GP prescribed headache pills but his sibling was on the ball and protested until he was referred to a hospital where a scan revealed a brain tumour the size of an egg. The tumour was removed and, although he has a large scar on the side of his head, so far, so good.

He had taken my advice in buying the maximum critical illness cover – £250,000 – thus clearing most of his mortgage.

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