£102k in S&S ISA: Facing Redundancy & Potential Ill-Health Retirement. Need a sanity check on my strategy.

Hi everyone,

I’m looking for some impartial perspective on my current financial crossroads, please.

I’m 42, working in Local Government (5 years service), but my health has deteriorated significantly in the last year due to a degenerative, incurable condition. To be clear, it is a physical disability that is not curable.

Financials:

• ISA: £102k currently sitting as cash within a Vanguard S&S ISA.
• Previous Setup: It was all in Global All Cap (VAFTGAG). I sold out late last year (at ~40% up) due to fears of AI overvaluation and instability at work.
• Emergency Fund: I have a separate, dedicated emergency fund sufficient for 6 months.
• The Problem: I know the cash is devaluing, but I’m terrified of a market correction coinciding with me losing my ability to earn (I know timing the market = bad etc).

Career/Health:

1. Redundancy Risk: My LA is discussing "unprecedented downsizing." They're on the record about this but no formal plans yet, but it could happen anytime in the next 0 to 5 years.
2. Ill-Health Retirement (IHR): I am in the very early stages of applying for Tier 1 IHR. If successful, I get a guaranteed pension for life. If I fail and lose my job, I am likely unemployable due to the severity of my flare-ups (2–3 weeks off every couple of months).
3. Partner’s Situation: My partner is on a low income and dealing with her own health challenges. If I lose my income and don't get IHR, we will be in a tight spot given I've always been the major breadwinner.

Issue:

One part of me wants to put the money back into the market because this is meant to be a long-term investment, and I'm conscious of inflation. However, the "worst-case" scenario (No employment income + No IHR) is worrying me.

Questions:

• Am I being too conservative by holding cash while waiting for the IHR decision (which could take a year)?
• Given the volatility of my future, should I look at a more "defensive" allocation?

I’m 42, and while my condition isn’t fatal, it is life-changing and likely ending my career. I’d appreciate any thoughts on how to manage this lump sum during such an unstable transition. My usual pragmatism has gone out of the window.

Thank you.