Ill Health Retirement

There must be a qualifying period of 2 years of continuous contributory membership.

Ill health awards cannot be granted if a member has not been in the Leicestershire CC Pension Scheme for this length of time (unless they have transferred in or amalgamated previous benefits which take them over 2 years membership.

There are 2 certificates, one which states the member is permanently incapable of discharging efficiently the duties of their local government employment (Certificate A) and the second which does not support that view (Certificate B).

(Certificate A) Certificate of permanent incapability - is to be completed by the IRMP when the member fulfils the medical requirements in order to be granted ill health retirement by the employer. This completed certificate is to be submitted to the Pensions Section at the time of retirement, along with any other necessary supporting documentation which the employer needs to supply.

There is an additional provision concerning individuals who, due to their health condition, continue in employment but at reduced hours. If the medical practitioner determines that the member has worked wholly or partly part time as a result of the condition that has caused the ill health retirement, then no account is taken of the reduction in membership attributable to that condition in assessing any resultant enhancement to the ill health award under tiers 1 or 2.

Please note that this refers to a contractual change in hours. A member being away from work or reducing their hours without a change to their contractual hours, perhaps on reduced or no pay sick leave or therapeutic return, is not covered by this clause, as they will have no detriment to their pension benefits in any case.

(Certificate B) A separate certificate (distinguished by a large X in the top corner) is to be completed by the IRMP where the member does not fulfil the medical requirements and would not be able to be ill health retired. These certificates are to be retained by the employer in case of any future appeal by the member.

Assessing permanent incapability from the Local Government post forms the basis for the first part of the certification. The member must be, as a result of ill health or infirmity of mind or body, permanently incapable of discharging efficiently the duties of the employment the member was engaged in.

The IRMP must them complete ONE of the following 3 sections, which will determine the appropriate tier under which these benefits will be paid. These tiers are linked to likelihood of working again.

The first tier:

• When the member is unlikely to be capable of undertaking gainful employment before reaching his Normal Pension Age (NPA). In these circumstances, the member receives benefits based on his accrued rights up to the date of termination and enhancement equal to all his/her prospective pension benefits from that date to his/her NPA.

The second tier:

• If, on the other hand, the member is unlikely to be capable of undertaking any gainful employment within 3 years after leaving the employment but is likely to be able to do so before reaching his/her NPA, benefits equal to his accrued rights and enhancement of 25% of his/her prospective pension benefits to NPA will be awarded.

The third tier:

• This is when the member is judged to be likely to be capable of undertaking gainful employment within 3 years after leaving the employment, or before NPA if earlier. An employee who leaves local government employment as a 3rd tier member will be entitled to their annual accrued benefits payable as a pension for such time as the 3rd tier member does not obtain gainful employment (or is capable of it), or until the employer stops payments following the review. The third tier pension is payable for a maximum of 3 years.

What is Normal Pension Age?

This will be the member’s State Pension Age (SPA) but with a minimum of age 65. This is individual to members and depends on their date of birth. Check your State Pension Age | gov.uk

It should be noted that if the member is judged to be “permanently incapable of discharging efficiently the duties of his/her current employment because of ill-health or infirmity of mind or body” BUT is judged at that time to be immediately capable of undertaking any gainful employment, the member cannot be granted ill health retirement by the employer.

Finally, the provision referred to earlier concerning employees who are working reduced hours and therefore receiving reduced pay as a result of their condition needs to be addressed.

It is also important to note that all the regulations referred to in this guidance are subject to the civil law code. As such, the determination of questions is based on the balance of probabilities test and not on the stricter criminal law test of beyond reasonable doubt.

Once the employer has terminated the member’s employment on ill health grounds, the information provided on the medical certificate will be used by the employer to determine which level of enhancement the member will receive.

An employee who leaves local government employment as a 3rd tier member will be entitled to their annual accrued benefits payable as a pension for such time as the 3rd tier member does not obtain gainful employment (or is capable of undertaking it), or until the employer stops payments following the review.

The 3rd tier member will be required to notify the previous employer when employment is found providing details, including pay, working hours and length of contract of that employment, and the employer would then stop payments if this was ‘gainful employment.’ (A full list of definitions follows later in this guide).

If payments have continued when gainful employment has been found, the employer will have powers to recover any overpayment from the 3rd tier member.

Members over 55

It should be noted that should either the review date take place, or the member find gainful employment on a date - after their 55th birthday, in reality, the member may not have their pension stopped, as they have passed their notional ‘eligible pension age’. They are able to continue to draw the pension on a voluntary retirement basis, however the benefits will be reduced in exchange for early payment. Because of this, and because reductions can be substantial, it is important that all members granted 3rd tier undergo the same review procedures, regardless of age. It could also be the case that the member’s condition may have worsened, and this would be picked up at the review.

If the member attains their normal pension age (NPA) within the first 18 months, then the pension would never cease, and the member will not be called for review. If the review recommends that the pension continues for a further 18 month period that takes the payment period past NPA, again, the pension would never actually cease.

The previous employer will be required to undertake a review when payments have been made for 18 months if payments are still continuing at that point.

The Pensions Section will write to the Human Resources Section of the former employer approximately 2 months before the assessment date, to remind them of the approaching review. Enclosed with that letter of instruction will be an Employer declaration and also the Review certificate (for the IRMP).

In order to avoid any unnecessary reviews taking place, and the associated cost and inconvenience involved, the Employer is advised to write first to the member to ascertain whether they are in gainful employment, if so a review need not take place, and then the 3rd tier payments would be stopped.

However, if the member is not in gainful employment you must send them for a medical review.

The IRMP should be asked whether it remained the case that gainful employment could have been obtained within a reasonable period of leaving the former local authority employment (and the doctor should be asked to state the precise point at which gainful employment could be obtained) or if the member is judged to be incapable of undertaking gainful employment within a reasonable period but is likely to be able to obtain gainful employment before his retirement age.

The Review certificate will be completed by the IRMP, and a copy forwarded to the Pensions Section, along with the Employer declaration, with Part B completed.

Please ensure that all is done to complete this process within the 2-month time period, so that the pension benefits are paid correctly, and pensions are not under or overpaid for any period.

What does the IRMP need to consider?

If the IRMP is of the opinion that the member remains capable of undertaking any gainful employment within the reasonable period, the employer will have powers to stop payments at the date specified by the IRMP. The IRMP may recommend that there is an immediate capability to undertake any gainful employment or they may propose a further review date. If a date is not specified, then the payments will cease on the third anniversary of the member’s date of leaving.

What if the member’s condition has worsened?

If it is deemed that the members condition has worsened, and this is still due to the condition that the original assessment was made on, and so is now considered being not likely to be capable of undertaking any gainful employment within 3 years of the date of leaving, this will result in the pension being uplifted to 2nd tier, from the 18 month point onwards.

A member could in the future ask the employer to review their entitlement after the 18 month review. The employer can determine that a 3rd tier member becomes a 2nd tier member upon the certification by the IRMP following the review even if the payment of the 3rd tier benefit has been stopped, as long as it is within 3 years of the pension having been stopped. The pension would be re-instated from the date the member became so incapable. A separate certificate is also available.

A determination to uplift 3rd tier to 2nd tier pension can only be made for a period of 3 years after the cessation of the pension. This will ensure late applications are not made for years to come.

What if an unrelated condition arises affecting the health of the member?

If the member suffers further ill health due to an unrelated health condition (i.e. a separate condition to that on which the original assessment was based), then an application for the pension to be brought back into payment can also be considered. However, there would be no uplift to the 
benefits.

Should the IRMP be unable to certify permanent incapacity, they may wish to indicate to the employer that they may wish to seek alternative or ‘lighter duties’. Should the employer be able to make this offer to the member, this may be a successful solution. However, should the member be referred once more if the alternative duties do not work out, they must be a re-assessed on their substantive post should the new arrangement only have been on a trial basis.

Should the change have been contractual they should be assessed against the new duties. Where alternative duties are suggested but are not available a final decision will be based on the duties of the substantive post.

If a person holds more than one post, then you may need to issue a separate certificate for each post. This is because the determination is based upon their ability to carry out the role of that post, and members may hold jobs with different skills, manual requirements and responsibilities. Employers must however use their own discretion. For a member with multiple part time roles of a similar nature, an employer may issue a single certificate which refers to both posts at the header.

A deferred member may apply for early payment of their deferred benefits if they become permanently incapable of performing the duties of their former post by reason of ill health or infirmity of mind or body, and is unlikely to be capable of undertaking gainful employment before normal pension age, or for at least three years, whichever is the sooner.

The IRMP must make his/her decisions based on the condition of the member at the date the application for early payment of the pension was made. This date is indicated on the Certificate.

(Deferred Councillor members also fall under separate legislation and have a separate certificate).

There are 4 categories of deferred Local Government member:

1. those who ceased membership prior to 1 April 1998
2. those who ceased membership between 1 April 1998 and 31 March 2008, both dates inclusive
3. those who ceased membership between 1 April 2008 and 31 March 2014, both dates inclusive
4. those who ceased membership on or after 1 April 2014

The rules governing each are slightly different.

It is therefore important to note that the date of leaving the pension scheme is vital in deciding what certificate you will need to select.

If the employee has a deferred pension because they finished their pensionable employment, then the date of leaving the post and the date of leaving the scheme will be one and the same.

For a current employee who has opted out of the pension scheme and therefore has deferred benefits the date they opted out of the scheme is used to determine whether to select Certificate C, D, E or F.

Please check with the Pensions Section if you have any doubts as to what date/certificate to use.

You will therefore need to watch out for members who have opted out of the scheme but have not left employment, as their ill health application comes under the deferred member rules, not active member rules. They may also have an application for an active member pension and a deferred member pension running simultaneously.

Employees who ceased membership prior to 1 April 1998

In these cases, the IRMP has to certify whether, in his / her opinion, the applicant is permanently incapable because of ill health or infirmity of mind or body of discharging efficiently the duties of their former employment and, if so:

• the date from which the applicant became permanently incapable (based on evidence that was discoverable at the time). This date is needed because the deferred pension is to be paid from the date on which the applicant became permanently incapable, which might be earlier than the date the deferred member submitted his / her application for early payment. If it is earlier than the application date, but after the date of leaving, the deferred pension is paid from the date the member became permanently incapable. However in the unlikely event that date is the same or earlier than the date of leaving, then morally the member would by default become entitled to retrospective ill health benefits with enhancement.

If, therefore, the person turns out to have been permanently ill at the time of leaving and was not seen by an Independent Registered Medical Practitioner at that time, the employer can still ask the Independent Registered Medical Practitioner whether the person would have met the permanent ill health definition under the LGPS Regulations at the date of leaving (based on the medical evidence that would have been discoverable at the date of leaving) and, if so, award an ill health pension, changing the original reason for leaving. Please contact the Pensions Section for further advice should this now unlikely situation arise.

• whether the applicant has a life expectancy of less than 1 year (as, if so, the pension can be commuted into a one off lump sum payment equal to 5 years of pension)
• whether, where the applicant is under 55, he / she is permanently incapable by reason of disability caused by physical or mental infirmity of engaging in any regular full-time employment and, if so, the date from which the applicant became so incapable. This information is required to determine whether, and if so the date from which Pensions Increase is to be applied.

Employees who ceased membership between 1 April 1998 and 31 March 2008 (both dates inclusive)

In these cases, the IRMP has to certify whether, in his / her opinion, the applicant is permanently incapable because of ill health or infirmity of mind or body of discharging efficiently the duties of their former post and:

• whether the applicant has a life expectancy of less than 1 year (as, if so, the pension can be commuted into a one-off lump sum payment equal to 5 years of pension.
• whether, where the applicant is under 55, he / she is permanently incapable by reason of disability caused by physical or mental infirmity of engaging in any regular full-time employment. This information is required to determine whether Pensions Increase is to be applied.
• If so the member may elect to receive payment of their retirement benefits ‘immediately’. A High Court case (Hamilton Vs Monmouthshire CC) confirmed this to mean ‘immediately from the date of application’ not ‘immediately from the date of incapacity’. Nonetheless if the OH physician believed that the permanent incapacity existed and was capable of being discovered at the date the person left employment, then enhanced ill health retirement benefits could be paid retrospectively. If, however, the person claims to have been permanently ill at the time of leaving and was not seen by an Independent Registered Medical Practitioner at that time, the employer can still ask the Independent Registered Medical Practitioner whether the person would have met the permanent ill health definition under the 1997 Regulations at the date of leaving (based on the medical evidence that would have been discoverable at the date of leaving) and, if so, award an ill health pension, changing the original reason for leaving. Please contact Pensions Section for further advice should this now unlikely situation arise.

Employees who ceased membership between 1 April 2008 and 31 March 2014 (both dates inclusive)

In these cases, the IRMP has to certify whether, in his / her opinion, the applicant is permanently incapable because of ill health or infirmity of mind or body of discharging efficiently the duties of their former post and, if so:

• whether the ill health or infirmity is likely to prevent the applicant from undertaking any gainful employment, whether in local government or elsewhere, within 3 years of the date of application or, if earlier, before age 65. The intention is that only deferred pensioners who, at the date of application had they had still been employed by the (ex) employer, would have fallen into the 1st or 2nd tier, will be able to have their deferred pension brought into payment.
• The date that the member became ‘permanently incapable’. This date will determine when the pension starts.
• whether where the applicant is under 55, he / she is permanently incapable by reason of disability caused by physical or mental infirmity of engaging in any regular full-time employment. This information is required to determine whether, Pensions Increase is to be applied.

Employees who ceased membership on or after 1 April 2014

In these cases, the IRMP has to certify whether, in his / her opinion, the applicant is likely to be permanently incapable because of ill health or infirmity of mind or body of discharging efficiently the duties of their former post and, if so:

• whether the ill health or infirmity is likely to prevent the applicant from undertaking any gainful employment, whether in local government or elsewhere, within 3 years of the date of application or, if earlier, before state pension age. The intention is that only deferred pensioners who, at the date of application had they had still been employed by the (ex) employer, would have fallen into the 1st or 2nd tier, will be able to have their deferred pension brought into payment.
• The date that the member became ‘permanently incapable’. This date will be used by the employer to determine when the pension starts.
• whether, where the applicant is under 55, he / she is permanently incapable by reason of disability caused by physical or mental infirmity of engaging in any regular full-time employment. This information is required to determine whether Pensions Increase is to be applied.
• A critical difference for this class of member is that the employer must determine the date that the member became eligible for early release of the pension. Therefore, the doctor is additionally required to indicate a date that the member first met the criteria for early release of the deferred pension. The employer can then introduce the pension from this date if it so decides. Therefore, the pension is not payable from the date of the member’s application or the date the IRMP signed the certificate, but could potentially be backdated to the beginning of the incapacity.

IN ALL CASES: Permanently incapable’ means that the person will, more likely than not, be incapable until, at the earliest, their normal pension age, which will be their state pension age with a minimum of 65 (age 70 in the case of former coroners).

Procedures

The date the member left the pension scheme will determine which of 4 Certificates are appropriate for signing. Please note these are different to those for current scheme members, and are clearly marked that they relate to deferred members.

There is not an equivalent ‘X’ refusal certificate for deferred members as the certificates cater for both certifying and not signing off an ill health retirement.

Should release of benefits be granted, these will be from the date specified below:

• Certificate C - The date certified in Part A as the date of the member became permanently incapable
• Certificate D - The date of application
• Certificate E - The date certified in Part A as the date of the member became permanently incapable
• Certificate F - The date decided by the employer based on when the member met the criteria for early release

As Councillor members are no longer allowed to participate in the LGPS*, there is only the facility for what must be presumed to be a former Councillor member to apply for the early release of his deferred pension benefits on ill health grounds. The IRMP must make his/her decisions based on the condition of the member at the date the application for early payment of the pension is made. This date needs to be indicated on the Certificate.

Should release of benefits be granted, these will be from the date specified below:

• Certificate H - The date of application by former Councillor
• *Certificate G - No longer exists as ward councillors are no longer allowed to join the pension scheme

Good practice advice was issued to scheme employers in May 2019 regarding the unusual scenario where a member who had been granted ill-health retirement then unfortunately died before their retirement date.

This would have an impact on the benefits paid.

As such, Pensions Section recommends the following:

1. If you have a scheme member with a terminal illness please contact the Pensions Section immediately (I’m sure you do this anyway) at pensionsbenefits@leics.gov.uk
2. The Pensions Section will calculate the benefits between:
   • Death in service
   • Tier one ill health retirement
3. If Tier one provides the higher benefits (it usually does, but not always) the employer must request their Occupational IRMP complete the ill health certificate A, as quickly as possible. This must be supported by an accompanying letter from the employer. (This is more than likely to be the usual practice anyway, so should be nothing different to your current process).
4. You may decide to use the date the IRMP has signed the ill health certificate A as the member’s date of leaving (not the date the IRMP examines the scheme member which is also shown on the certificate). You do not need the scheme member to work their notice period, thereby negating the risk of them passing before retirement. (Some employers already follow this process, but not all do).

The ill health insurance (for employers that have this) usually pays out for tier one and tier two ill health retirements, but not for death in service.

Should the IRMP complete the certificate NOT recommending ill health retirement or early release of a deferred pension, the employer will need to write to the member/former member advising them as to why their request has not been granted by the employer (or former employer). Even if the member has been granted ill health retirement, it is possible that the member still may wish to object to this. Perhaps they do not believe themselves to be permanently incapable, or maybe they wish to disagree with the tier they have been awarded.

It should be noted that all Scheme Members have the right of appeal. This takes place once the Employer has made the decision which the member is dissatisfied with, or within 6 months of the date of the determination. In the first instance, a member may appeal under that employer’s own internal appeals procedures, using the means available to any employee who disagrees with any decision made which affects the nature of their employment. If they remain dissatisfied, then he can turn to the Pensions Appeal process, IDRP, and appeal to the Specified Person of his Employer to review the case. The member can contact the Pensions Section and request an information leaflet and form, which will contain the name and address of the Specified person nominated by their employer/former employer.

Should this review fail, he may appeal in the Second Stage to the Administrating Authority i.e. Leicestershire Council Pension Fund, who will refer the matter to one of the County Council Legal Advisors.

The following paragraph should always be inserted in any letter from the employer in which they are being informed of a decision affecting their pension:

Right of appeal

If you are dissatisfied with any decision given in this notification you may, within six months of receiving this letter, appeal in writing under the approved Internal Disputes Resolution Procedure (IDRP). It is suggested however, that any points of difference should firstly be addressed with us on an informal basis. Should you still be unhappy and wish to pursue IDRP, you can contact The Leicestershire County Council Pensions Section who will provide you with a Complaints form, which will include with the name and address of the ‘Specified Person’ nominated by our organisation, who would formally investigate your complaint. In the unlikely event of a disagreement progressing beyond this stage, details to enable an appeal to the final stage two ‘Appointed Person’ nominated by the pension scheme’s administering authority, would be provided with the decision reached by the ‘Specified Person’.

The Pensions Ombudsman Service has issued advice for good practice to aid employers in their decision – the decision to award ill health retirement is being made by the employer (not the IRMP, they are providing the medical opinion):

• The employer must obtain an IH certificate from IRMP
• The employer must make the decision after considering the IH certificate – but they are NOT bound by it
• The employer must weigh up all evidence and come to a decision
• The employer may give more weight to some evidence than others – as long as it shows it has done so and why

Failure to give the reasons for the decision, failure to follow the process, failure to consider all evidence would all equal maladministration.

The Pensions Ombudsman Service therefore chose to also highlight the importance of scheme employers obtaining narrative reports from independent registered medical practitioners (IRMPs) in dealing with ill-health retirement cases.

Narrative reports are reports that help employers to understand the reasoning behind the medical opinion the IRMP has given. As the decision to award an ill-health retirement is that of the employer, a full understanding of the IRMP’s reasoning will be important to minimise the risk of the employer making a poor or flawed decision, potentially resulting in a mal-administration claim from the member.

When referring a pension scheme member or ex-member for a medical examination, the appropriate forms for that member should be supplied to the IRMP by the employer.

This should include certificates for both agreeing and turning down the recommendation for ill health retirement for active members, or the dual purpose certificates for deferred members.

Before sending the documents on to the IRMP, the employer will need to complete the first part of the Certificate, which comprises of some personal details of the (ex) scheme member.

In all cases the employer will need to ensure that the IRMP has in their possession information concerning the nature of the (former) employment in order that they can make an informed judgement.

The website contains flow charts to help HR staff and line managers understand the referral process and the part they play in it.

In the view of the LGPC Secretariat, where a scheme employer has made a decision to expect a narrative report to be supplied by an IRMP, they should make this clear at the time of commissioning the IRMP to provide a medical opinion. If an IRMP refuses to do this, the scheme employer may wish to consider appointing a different IRMP to avoid any risk of them making a poorly informed decision.

Once an ill health retirement case has been processed, the cost of that case to the employer is calculated. The approach to financing that cost will depend on whether the employer has arranged to take out an ill health insurance policy with Legal and General.

Process updated effective from 1 April 2020

Employers with ill health insurance: for any cases where the scheme member was granted either tier one or tier two ill health retirement, an invoice will be issued by the Pensions Section, which must be paid. The employer would then reclaim the money from Legal and General.

Invoices will not be issued for any tier three cases or where a deferred pension has been brought into payment on ill health grounds. These costs will be included in the calculation of the employer contribution rate by the fund actuary at the next valuation.

Employers without ill health insurance: those costs are recorded internally and are assessed on a quarterly basis by the Pensions Section, who will compare those costs to the ill health ‘allowance’ that the fund actuary has calculated for each employer. The Pensions Section will write to employers annually at the end of each tax year to advise of the costs incurred and ask them to consider if they wish to pay that cost. This option is to help employers manage their future employer rates. If an employer chooses not to make payment, the cost will be reviewed at a future valuation within their future rate.

If it is noted that during the quarterly assessments that costs are higher than expected, the Pensions Section may decide to contact employers prior to the end of the tax year to discuss any specific actions that may be required.

If you are interested in finding out more about ill health insurance, please email pensions@leics.gov.uk