Understanding the ill health retirement process
- Important protection
- Three tiers of protection (actives)
- One tier protection (deferred)
- Strict eligibility criteria
- You make the decision
- The employer to instigate an ill-health retirement process for their active employees
- •The employer must consider the following questions separately for each pensionable employment and make a decision:
- Decision 1 - is employee fit to continue in current employment?
- Decision 2 - are they eligible?
- Decision 3 - what tier?
- Your decision must be made based on the opinion of the Independent Registered Medical Practitioner (IRMP)
- Ultimately the employer's decision
- Make this decision after receiving advice from your Occupational Health advisor
- Examples:
- Temporary illness that is taking several months to treat
- Potentially permanent condition for which normal medical treatment regimes have not yet been exhausted
- Permanent condition where treatment has now finished
To be entitled to an ill health pension the employee must:
- be below normal pension age
- be dismissed on grounds of ill health
- have at least two years qualifying service (not just two years in current employment, they may have other qualifying service)
- be permanently incapable of discharging efficiently, the duties of their current employment
- not be immediately capable of undertaking gainful employment
- have been certified by the Independent Registered Medical Practitioner as meeting the ill health pension criteria
- The member will, more likely than not, be incapable to do the current job efficiently until, at the earliest, his/her Normal Pension Age.
- Please note: ‘normal pension age’ is now linked to the individual member’s State Pension Age.
- “More likely than not” is key
- Probability Test - If a member would, on the balance of probabilities, recover sufficiently to be capable of undertaking their current/former employment before their normal pension age they cannot be said to be permanently incapable
- Any paid employment 30 hours a week minimum of 12 months
- not comparable to the current employment
- A permanent variable hours contract only becomes gainful employment when a pattern of 30 hours has been established
- Independent Registered Medical Practitioner
- As the name implies – must be independent
- Must be qualified in occupational health medicine
- Approved by the Administering Authority
- IRMP not being asked to confirm ill health dismissal, but to give a medical opinion on the case
- IRMP considers medical factors only not factors like the availability of gainful employment in a particular area
- What level of benefits to award them
- The Independent Registered Medical Practitioner (IRMP) will indicate their medical opinion as to which tier of benefits is appropriate.
- Your decision not the practitioners
- This is an important decision as it will determine:
- Applicable enhancements
- Permanent or temporary
Tier 1
Criteria - Member is incapable of undertaking any gainful employment before NPA
Benefit - Enhancement based on 100% of the further annual pension that would have been achieved between leaving and NPA
Payment period - Permanent
Tier 2
Criteria - Member is incapable of undertaking any gainful employment for at least 3 years but it is likely they will be capable of doing so before NPA
Benefit - Enhancement based on 25% of the further annual pension that would have been achieved between leaving and NPA
Payment period - Permanent
Tier 3
Criteria - It is likely that the member will be capable of undertaking gainful employment within 3 years
Benefit - No enhancement - based on actual pension built up
Payment period - Maximum 3 years but will cease if member obtains gainful employment, subject to 18 month review
Two seperate processes that come together towards the end
- Are you going to continue to employ this person?
- Are they eligible for an ill health pension?
For success, you have to manage the employees expectations.
No promises.
Employers must determine:
- Is the employee eligible e.g. below Normal Pension Age, have 2 years qualifying pensionable service
- Does the member hold a deferred pension
- Does the IRMP consider the member’s condition make them permanently incapable (to normal retirement age) of their current role
- Does the IRMP consider the member have a reduced likelihood of undertaking any gainful employment before normal retirement age
- Must declare that they have not previously:
- Advised on the case
- Given an opinion on the case
- Been involved in the case
- Must state that they have not acted as the representative of:
- The employee
- The employer
- Any other party in relation to the case
- Statements included on medical certificate
- Generally three stages for current employees:
- Stage 1 - Employer monitors sickness absence under policy and in conjunction with Occupational Health provider
- Stage 2 - Health assessment - Employer makes referral to IRMP for medical opinion and certificate
- Stage 3 - Dismissal - Employer decides level of ill health retirement (or not) and terminates employment
- Ensure medical process commence before termination of employment on ill health
- Monitor and manage sickness absence in accordance with policy and occupational health
- Make adjustments to existing job
- Consider re-deployment, part time work, career break, retraining
- Comply with the Disability Discrimination Act
- Don't raise member's expectations
- Employer to provide the IRMP with:
- The job description
- Member's sickness record
- OHU report
- Ill health template form
- Employer determines
- Whether ill health is met or not
- Tier of benefit awarded - 1,2 or 3
- Remember to obtain signed medical certificate where the IRMP indicates not permanent ill health and notify fund
Inform the employee of your decision and agree a dismissal date. Provide member with right of appeal
Ill health retirement criteria is met
- HR dismiss employee and inform Pensions of ill health retirement
Ill health retirement is not met
- HR dismiss employee - inform member of reason for refusal
- Pensions calculate deferred benefit
Ill health benefits cannot be awarded if the member resigns.
Employment sends relevant forms and certificates to Pensions
- Leaver form
- Reason for leaving - ill health and tier and support
- CARE pay
- Final pay
- Copy of dismissal letter
- Completed and signed ill health certificate
Pensions Team provide member with options and forms
- Details of pension options
- Lifetime allowance form
- Bank details form
- Expression of wish form
- Request copies of birth certificates etc.
On receipt of the members completed forms, the Pensions Team will arrange payment of benefits.
- Tier 3 pensioner MUST notify employer when gainful employment obtained
- Must provide details of pay and working hours
- Employer decides whether employment is gainful
- If it is – inform Pensions of the date to stop payments
- If overpayment (gross amount) is recovered – pay over to Pension Fund asap
- Short term contracts (less than 12 months) do not constitute gainful employment
- Open ended contract for 30 hours or more per week = gainful employment
- Employer must conduct a review after 18 months
- If the member is in gainful employment - stop the payment can recover any overpayment (employers discretion)
- Notify Pensions using the 18 month review decision certificate
- If the member is not in gainful employment - obtain a further certificate from an IRMP
- The IRMP certifies as to the member’s capability of undertaking gainful employment in the future – following which the employer:
- Stops the payment immediately if capable of gainful employment
- Continues the payment but stops when benefits paid for 3 years
- Uplifts to tier 2 (never tier 1)
- At anytime up to review (but most likely following Tier 3 review) or at any stage up to 3 years after Tier 3 pension stopped
- Must relate to condition that resulted in Tier 3 pension
- IRMP certifies that:
- Member no longer capable of undertaking gainful employment within 3 years of date of leaving
- Uplift paid from date of review 25% of enhancement calculated from date of leaving
NB no option to commute additional pension for a cash lump sum
- You may receive requests for deferred pensions to be paid on ill health from:
- Former employees
- Active employees who have opted out of the scheme
- Employees who are current members but also have a deferred pension
- Your decision to award
- Only receive unenhanced benefits
- 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
- Leaving date before 01/04/1998 – date the IRMP certificate met the permanency criteria
- Leaving date between 01/04/1998 and 31/03/2008 – date the member made their application
- Leaving date on or after 01/04/2008 and before 01/04/2014 – date the IRMP certifies the member met the permanency criteria
- Leaving date after 31/03/2014 – this is the date the employer determines the ill health benefits should be released
- In cases of terminal illness - speeding up the process is crucial
- In most cases ill-health retirement provides the better overall 'financial package'
- Pensions will provide comparison estimates in these sensitive cases
- Fast track the case via OHU provider
- Death before employment is terminated results in death in service benefits
- Any decision made regarding ill health can be appealed by the member including:
- entitlement to an ill health benefit
- failure to make a decision
- disagreement about the tier of benefit
- the certification process
- suspension of tier 3 pension
- IRMPs do not make the decision
- Ensure your sickness absence procedure is followed
- Ensure timely referral to IRMP
- Ensure all up to date medical evidence is provided to the IRMP
- Monitor certification process and ensure the IRMP signs it
- Decide whether the case is an ill health retirement or not
- Decide which level of ill health benefit to award and sign the certificate
- Where there is no ill health benefit awarded - ensure member is notified of reason
A copy of this information is available in a downloadable version below.