Ill-health retirement

 

The following guidance issued by Ministry of Communities and Local Government replaces any previous guidance on ill health retirement in the LGPS.

The scheme requires the preparation and publication of statutory guidance to accompany the ill health retirement regime. Statutory ill-health retirement guidance (external link to a PDF document) has been produced to reflect the continuing three tiers of ill-health retirement benefits in the 2014 scheme.

It has not changed substantially from previous guidance, but has been refined, at the request of occupational health professionals, to make it clear that their role is purely to assess incapacity against a member's likelihood of being capable of undertaking gainful employment rather than the member's ability to obtain employment which earlier regulations asked. The rest of the text deals with the updating of legal references and the inclusion of a new section regarding 'assumed pensionable pay and ill-health retirement' so that where enhanced benefits are awarded, they are credited to a member’s pension account in line with the career average pension arrangements under the 2014 scheme.


 

Ill-health summary  Back to top

Employers must manage the difficult and sensitive area of ill-health in the workplace efficiently and effectively, whilst balancing the needs of the member, the organisation and the pension fund.

They must take account of employment law and disability discrimination legislation and be fully aware of the LGPS ill-health retirement regulations when making any decision affecting a contributing or deferred member of the scheme.


 

Ill-health criteria  Back to top

To qualify for an ill-health pension, employees must be or have been a member of the LGPS and either:

  • have two years membership in the scheme or be deemed to have achieved this

or all of the following:

  • hold a deferred benefit in the scheme
  • be permanently incapable (until normal retirement age) of doing their current job or former job
  • be unlikely to be immediately capable of undertaking gainful employment

Please note: schedule 1 defines gainful employment as paid employment for:

  • not less than 30 hours per week
  • for a period of not less than 12 months

 

Independent registered medical practitioners (IRMP)  Back to top

An independent doctor must complete an ill-health certificate certifying whether, in his or her opinion, the member meets the ill health or not.

The IRMP must be qualified in occupational health medicine and be approved by Staffordshire Pension Fund. They must also certify that they have not previously been involved or advised on the case.

You can obtain a list of the current panel of approved independent doctors for use on our web site (password protected) or by contacting us.


 

Ill-health certificates  Back to top

Our suite of certificates can be obtained from our website (password protected) or by contacting us.


 

Dates for payment of ill-health benefits  Back to top

For both active and deferred members, this date is determined by the employer.

Active members

This is used as the date of retirement (termination of employment).

Deferred members

Under regulation 38, previous employees with a deferred benefit can apply for early release of the benefit on health grounds and employers can decide to release the unenhanced benefit from the date they determine the member became permanently incapable of that former employment.

The date should be determined as follows:

  • member left before 1 April 1998 (use pre-2008 certificate). This is the date the IRMP certificate met the 'permanency criteria'
  • member left between 1 April 1998 and 31 March 2008 (use pre-2008 certificate). This is the date the member made their application
  • member left on or after 1 April 2008 and before 1 April 2014 (use post 2008 – pre-2014 certificate). This is the date the IRMP certifies the member met the 'permanency criteria'
  • member left after 31 March 2014 (use post 2014 certificate). This is the date the employer determines the ill-health benefits should be released

 

Benefit tiers  Back to top

This only applies to active members and is decided by the employer.

Tier 1

The employer has decided to terminate the member's employment claiming their ill-health or infirmity of mind or body renders them permanently incapable of discharging efficiently the duties of their current employment and, because of that condition, the member is unlikely to be capable of undertaking any gainful employment before normal pension age.

Benefits are enhanced by an amount equivalent to, that which the member would have accrued between the date of termination of employment and normal pension age, based on an assumed pensionable pay.

Tier 2

The employer has decided to terminate the member's employment on the grounds that their ill-health or infirmity of mind or body renders them permanently incapable of discharging efficiently the duties of their current employment and, because of that condition, the member is unlikely to be capable of undertaking any gainful employment within three years of leaving the employment but is likely to be able to undertake gainful employment before reaching normal pension age.

Benefits are enhanced by one quarter of the tier 1 enhancement.

Tier 3

Reasonable prospect of a member being capable of undertaking gainful employment within 3 years of leaving.

Benefits are not enhanced, paid until the member obtains further gainful employment, reviewed after 18 months and paid for a maximum of three years.


 

Tier 3 reviews  Back to top

The employer conducts a tier 3 review when the tier 3 pension has been in payment for 18 months.

The process is as follows:

  • stop the pension if the member is found to be in gainful employment
  • obtain a further medical certificate if not in employment
  • based on the member's capability of undertaking gainful employment either stop the pension immediately or 3 years after the date of leaving or uplift to a tier 2

 

Tier 2 uplift  Back to top

This can happen at any time while the tier 3 benefits are on-going, or up to 3 years after they have been discontinued.

It must relate to the medical condition that resulted in the award of a tier 3 pension only.

Any uplift (additional 25% of potential pension earned to normal pension age) is paid from the date of the review and there is no option to commute to a lump sum.


 

Terminal illness  Back to top

In the majority of cases, ill-health retirement provides the best overall 'financial package' for the member, so speeding up the process is crucial.

Employers should fast-track the case with their occupational health providers and ask us for estimates in these very sensitive cases.

Death occurring before employment is terminated will result in a death in service benefit.


 

Roles and responsibilities  Back to top

Employer of an active member

  • Manages their internal sickness absence procedure
  • Decides to terminate a member's employment
  • Refers the employee to an independent registered medical practitioner (IRMP)
  • Obtains the IRMP medical opinion and certificate
  • Obtains the IRMP medical opinion if the member has worked reduced hours due to ill health
  • Determines the tier of ill health benefit and the member's termination date and informs employee of this decision
  • Notifies Staffordshire Pension Fund of its decision
  • Provides Staffordshire Pension Fund with the leaver form and medical certificate
  • Conducts the 18 month review of tier 3 pensions
  • Manages the first stage of the internal dispute resolution procedure (IDRP)

Employer of a deferred member

  • Receives application from former employee for early release of pension
  • Refers the former employee to an independent registered medical practitioner (IRMP)
  • Obtains the IRMP medical opinion and certificate
  • Decides whether to release deferred members benefit on ill health grounds and informs former employee of this decision
  • Notifies Staffordshire Pension Fund of its decision
  • Provides Staffordshire Pension Fund with the medical certificate
  • Manages the first stage of the internal dispute resolution procedure (IDRP)

Staffordshire Pension Fund

  • Approves the independent registered medical practitioner (IRMP)
  • Provides guidance to the employer
  • Produces the estimate for the employer (if required)
  • Processes the ill health retirement on receipt of the accurate and complete forms
  • Pays the ongoing pension
  • Manages the second stage of the internal dispute resolution procedure (IDRP)

Doctor (IRMP)

The independent registered medical practitioner (IRMP) is approved by Staffordshire Pension Fund

  • Qualified in occupational health
  • Has no previous involvement in the case
  • Gives a medical opinion if the (former) employee meets the criteria for ill health retirement
  • Gives a medical opinion if the employee has worked reduced hours due to their ill health (active member only)

Internal dispute resolution procedure (IDRP)

The LGPS two stage appeal process which is often raised when members disagree with the ill health benefits decision.

  • Stage 1 – dealt with by the employer
  • Stage 2 – dealt with by the administering authority – Staffordshire Pension Fund

Further information  Back to top

You may find the ill-health flow charts for active members and deferred members helpful to download and printout:

Please note: this is only a summary of ill–health retirement.

For more information, please see the Ministry of Housing, Communities and Local Government (MHCLG) statutory guidance.

Contact us for any further information.