Ill health retirement is available to all employees aged between 16 and 75 who have two or more years membership of the scheme. Three tiers of benefits are available for active members depending on the likelihood of the member being able to undertake gainful employment in the future. You may want to signpost the employee to the Ill Health Retirement Guide – Active Members.
Ill health retirement is an employer driven process and applies to both current employees and employees who have deferred benefits in the scheme. Tiers do not apply to employees with deferred benefits. You may want to signpost the employee to the Ill Health Retirement Guide – Deferred Members.
If you have either a current employee or an employee with deferred benefits who has been given a terminal diagnosis please follow the end of life process. This will ensure the case is dealt with as a priority and will determine the most financially beneficial outcome.
There is no upfront pension strain cost for ill health retirements as the cost is built into the employer contribution rate set at each triennial valuation.
Responsibility for deciding the grounds on which the employment of a Local Government Pension Scheme (LGPS) member will be terminated rests solely with the employer and is a separate issue to the award of ill health benefits. An employee’s employment can be terminated before the ill health process is completed, with a certificate subsequently obtained to help determine whether the employee satisfies the criteria for an ill health retirement pension.
An employer cannot make an ill health retirement determination unless they have obtained a certificate from an Independent Registered Medical Practitioner.
Employer Ill Health Guide for Active Members
(The terms shown in bold are explained in the glossary at the end)
When to start the process
Under the LGPS regulations the employer has to terminate the employee’s employment on the grounds of ill health or infirmity of mind or body before the employee’s Normal Pension Age (NPA). Before deciding whether the employee meets the conditions for an ill health retirement pension and, if so, which tier of benefit to award, the employer must obtain a certificate from an Independent Registered Medical Practitioner (IRMP) who has been approved by the administering authority.
The management of ill health in the work force and, in particular during the period leading up to the termination of employment, is outside the scope of the LGPS regulations.
Responsibility for deciding the grounds on which the employment of an LGPS member will be terminated rests solely with the employer and is a separate issue to the award of ill health benefits. An employee’s employment can be terminated before the ill health process is completed with a certificate subsequently obtained to help determine whether or not the employee satisfies the criteria for an ill health retirement pension.
It is expected however, that an employee suffering from ill health will have been through the ‘usual’ internal processes such as occupational health, attendance management etc. and that an assessment for ill health retirement would form part of that process. An employer cannot make an ill health retirement determination unless they have obtained a certificate from the IRMP.
Assessment
An employee being considered for ill health retirement must be referred to an IRMP that has been appointed by their employer. The IRMP providing the certificate must not have previously advised or given an opinion on the case.
The IRMP should be provided with as much information with regard to the employee’s job role and any supporting medical information such as GP or specialised reports as possible. It will be necessary therefore to obtain consent from the employee before releasing any information to the IRMP.
You should try to organise a referral to the IRMP as soon as possible to prevent a delay to the assessment. Following the assessment, the IRMP will issue an ill health certificate confirming their opinion on whether or not the employee’s ill health or infirmity of mind or body renders them permanently incapable of discharging efficiently the duties of the employment they were engaged in i.e. would the employee be able to continue doing their job. The IRMP will also consider whether the employee’s ill health or infirmity of mind or body renders them not immediately capable of undertaking any gainful employment i.e. would the employee, at the time of the medical assessment, be able to do a different job which satisfies the definition of gainful employment.
If the IRMP is satisfied that the employee has met the criteria for an ill health retirement pension they will also recommend which tier of benefits should be awarded.
Decision
Following an opinion from the IRMP it is the employer who makes the final decision, based on the balance of probabilities, whether to award ill health retirement and to determine which tier of benefits to award. In making this decision you should:
- Give strong regard to the IRMP’s medical opinion regarding the likelihood of the individual being capable of undertaking any gainful employment. It is important that you understand the reasoning of the IRMP and it is therefore useful if a narrative report is provided with the certificate.
- Make sure you consider the person’s ability to undertake gainful employment taking into account non-medical factors that will aid or prevent them from doing so.
- Document the decision making process so that it is clear why a decision has been made. This is particularly pertinent if the individual appeals.
If the employee appeals, the opinions given by the IRMP will be given significant weight and any decision to not award ill health retirement or to award a different tier to that advised by the IRMP, must be backed up by clear justification for that decision.
If a decision is made to award ill health retirement, a further decision needs to be made on the level of benefits to be paid. There are 3 tiers of ill health retirement depending on the employee’s ability to undertake gainful employment in the future.
Tier 1
Awarded if the employee is unlikely to be capable of gainful employment before their NPA. Ill health benefits are based on the pension the employee has built up in their pension account at the date of ill health retirement, plus the pension they would have built up if they had been in the main section of the scheme until NPA.
Tier 2
Awarded if the employee is unlikely to be capable of gainful employment within 3 years of leaving, but they are likely to be capable before NPA. Ill health benefits are based on the pension the employee has already built up in their pension account at the date of ill health retirement, plus 25% of the pension they would have built up had they been in the main section of the scheme until NPA.
Tier 3
Awarded if the employee is likely to be capable of gainful employment within 3 years of leaving or before NPA if earlier. Ill health benefits are based on the pension the employee has already built up in their pension account at the date of ill health retirement. Payment of these benefits will be stopped after 3 years or earlier if the employee is in gainful employment or becomes capable of such employment, provided they have not reached NPA by then.
Part time employment
Where an employee has been working reduced hours and therefore had reduced pay, the IRMP can certify that the employee’s pay for the period being used to calculate the assumed pensionable pay (APP) figure, was lower as a result of the employee’s ill health. The employer can calculate the APP as if the employee’s contractual hours had not been reduced.
If the employee has always been part time, the employer can calculate the APP as if the employee’s contractual hours had not been further reduced.
Information to be provided to the North Yorkshire Pension Fund (NYPF)
The NYPF will not provide estimates of pension benefits for ill health retirement. An estimate of the benefits payable can only be provided once the ill health retirement has been agreed. The NYPF will need the following:
- Advance Notification of Retirement Form (ADNOT) if the date of leaving is in the future. Not relevant if the leave date has already passed or is within the next two weeks.
- Ill health certificate with manager’s authorisation.
- Leaver Form or input as a leaver on i-Connect.
Where the employee’s leave date is in the future, an ADNOT Form should be provided along with the certificate and manager’s authorisation, as soon as possible in order for benefit options to be provided. This will reduce the delay at actual leaving.
Where Tier 1 benefits are awarded it is recommended that employment is ended immediately and notice periods waived to prevent any delay which could result in the employee dying in service.
What the NYPF will do
When the NYPF has received a completed ADNOT, leaver information, ill health certificate and authorisation that confirms the tier of benefits payable, they will calculate the benefits payable to the employee.
A retirement estimate and forms will be sent to the employee within 5/10 working days, however serious cases will be dealt with as a priority. When the employee returns the completed forms, and the leaver information has also been received the benefits will be processed.
If a tax free lump sum is payable payment will be made on the first available Friday following receipt of all the relevant paperwork. Pension payments are made by BACs on the last working day of each month. Due to the normal payroll cycle the first pension payment may be paid up to two months after the member’s retirement date.
Ill health certificate received without supporting documentation
If the ill health certificate is received without a Leaver Form/employee being entered as a leaver on i-Connect and/or the employer’s authorisation to pay ill health retirement benefits, the NYPF will not be able to process the pension benefits or provide any pension estimates to the employee. The NYPF must have all the required forms and authorisation in order to pay pension benefits.
If the ill health certificate and authorisation is received after the Leaver Form/i-Connect leaver information and, the retirement has already been processed, the NYPF will recalculate the benefits in line with the tier of ill health awarded. There may be an administration charge payable for the recalculation.
The employee will have already received payment of the normal benefits so it will be necessary to arrange payment of any pension arrears and additional tax free lump sum. Payment of normal benefits can be an issue however if the employee had a relatively low level of benefits and this has been converted to a one off lump sum (known as trivial commutation). In this scenario, the employee may have received benefits they are not entitled to as the ill health uplift would take the level of benefits over the maximum amount permitted for trivial commutation. In this case the employee would be required to pay back the lump sum.
To prevent this, you should tell the NYPF that the employee has been dismissed but that a possible ill health retirement case is ongoing. There is a tick box on the Leaver Form to indicate that an ill health retirement application is in progress at the point of dismissal. The employee’s record will be noted accordingly and the benefits will not be processed until the outcome of the ill health process is known. It is important that the NYPF is notified where the ill health application has been declined so payment of ordinary benefits can be made if applicable.
Glossary
Normal Pension Age: Age 65 or State Pension Age if later. This can be checked at: www.gov.uk/check-state-pension.
Gainful employment: This means paid employment with any organisation for at least 30 hours a week for a period of at least 12 months.
Two years membership: to receive ill health retirement the employee must have been in the scheme for 2 years or, if they have less than 2 years, they must have transferred in other pension benefits. The pensions section can check this for you.
Independent Registered Medical Practitioner (IRMP): This is the practitioner who you approve to carry out medical assessments for pension purposes and to provide the necessary certificates. The practitioner must be suitably qualified in Occupational Health, be registered with the General Medical Council and have an understanding of the ill health regulations in the LGPS.
Assumed Pensionable Pay (APP): APP is the notional pay figure used to represent the normal pay the employee would have had if they weren’t on reduced or nil pay. APP is calculated by adding together the monthly pay for the 3 complete months before the relevant event, excluding any pensionable lump sum payments and then grossing this figure up to an annual figure i.e. divide by 3 and multiply by 12. Further information can be found on the Local Government Association’s website at Employer bite size training (lgpsregs.org).
Employer Ill Health Guide for Deferred Members
Start of the process
A former employee who has pension benefits in the scheme and who wishes to apply for ill health benefits should contact their former employer to request an ill health assessment. The former employee will be assessed against their previous job role, the criteria for ill health retirement depends on when the employee left the scheme.
Assessment
A former employee being considered for ill health retirement must be referred to an Independent Registered Medical Practitioner (IRMP) that has been appointed by their employer. The IRMP providing the certificate must not have previously advised or given an opinion on the case.
The IRMP should be provided with as much information with regard to the employee’s former job role and any supporting medical information such as GP or specialised reports as possible. It will be necessary therefore to obtain consent from your former employee before releasing any information to the IRMP.
You should try to organise a referral to the IRMP as soon as possible to prevent a delay to the assessment. Following assessment, the IRMP will provide an ill health certificate confirming their opinion on whether or not the former employee meets the ill health criteria as follows.
| Date of leaving | Ill health criteria |
| Left on or before 31 March 2008 | Assessed as permanently incapable of carrying out the job the employee was working in when they left |
|
Left between 1 April 2008 and 31 March 2014 |
Assessed as permanently incapable of carrying out the job the employee was working in when they left and unlikely to be capable of carrying out gainful employment before age 65 or for at least three years, whichever is sooner |
| Left on or after 1 April 2014 |
Assessed as permanently incapable of carrying out the job the employee was working in when they left and unlikely to be capable of carrying out gainful employment before NPA or for at least three years, whichever is sooner |
Decision
Following an opinion from the IRMP it is the employer who has the final decision, based on the balance of probabilities, on whether to award ill retirement from deferred.
If ill health is granted the date the benefits are payable from depends on when the former employee left the scheme.
| Date of leaving | Date of payment |
| Left before 1 April 1998 | Payable from the date the IRMP certifies that the former employee first met the criteria for payment of deferred pension benefits on ill health grounds |
| Left between 1 April 1998 and 31 March 2008 | Payable from the date the former employee applied to the employer to release benefits on ill health grounds |
| Left between 1 April 2008 and 31 March 2014 | Payable from the date the IRMP certifies that the former employee first met the criteria for payment of deferred pension benefits on ill health grounds |
| Left on or after 1 April 2014 | Payable from the date the employer determines that the former employee meets the criteria for early release of deferred pension benefits on ill health grounds |
The benefit payable is the value of the deferred benefits including any increases applied since retirement. There is no enhancement to the benefits paid on ill health from deferred.
Information to be provided to the NYPF
The NYPF will not provide estimates for ill health retirement, figures can only be provided once the ill health retirement has been agreed. The NYPF will need the following to process the benefits:
- Ill health certificate and manager’s authorisation.
- Confirmation of the date the benefits are payable from.
What the NYPF will do
When the NYPF has received an ill health certificate and authorisation that confirms the date the benefits are payable from, they will calculate the benefits payable to the former employee. A retirement estimate and forms will be sent to the former employee within 5/10 working days however, serious cases will be dealt with as a priority.
When the former employee returns the completed forms, the benefits will be processed. If a tax free lump sum is payable payment will be made on the first available Friday following receipt of all the relevant paperwork. Pension payments are made by BACs on the last working day of each month. Due to the normal payroll cycle the first pension payment may be paid up to two months after the member’s retirement date.
Glossary
Normal Pension Age: Age 65 or State Pension Age if later.
Gainful employment: This means paid employment with any organisation for at least 30 hours a week for a period of at least 12 months.
Two years membership: to receive ill health retirement the former employee must have been in the scheme for 2 years or, if they have less than 2 years, they must have transferred in other pension benefits. The pensions section can check this for you.
Independent Registered Medical Practitioner (IRMP): This is the practitioner who you approve to carry out medical assessments for pension purposes and to provide the necessary certificates. The practitioner must be suitably qualified in Occupational Health, be registered with the General Medical Council and have an understanding of the ill health regulations in the LGPS.
End of life process for Active and Deferred Members
Introduction
Sometimes, sadly, a member of the pension scheme will be given a terminal diagnosis with a very short life expectancy. It is possible you as the employer will already be progressing an application for ill health early retirement and that process is able to be completed and the member’s employment terminated before they die.
However, this is not always the case, and the person could die before the ill health retirement process has been completed or perhaps the process hasn’t even been started. This can happen because the member believes their family will be better off with a death in service benefit or they just want to carry on as ‘normal’ for as long as possible.
End of life
Where it becomes apparent someone does not have long left to live, the North Yorkshire Pension Fund (NYPF) must act promptly. The Fund would normally expect notification to come from your Human Resources (HR) team. If it hasn’t, we will contact you to establish who is dealing with the case.
The NYPF require written confirmation from you that it is an end of life scenario which requires completion of the End of Life Form. The form should be requested from the pensions team for each case to ensure it is the latest version. Email Heather Cashmore, Steph Blakey and Phillippa Cockerill to request the form, using Urgent – End of Life as the subject line. Please also cc in pensions@northyorks.gov.uk in case the named individuals are unavailable.
Using the form NYPF will:
- Provide confirmation of which benefit is the most financially beneficial for the member and family – death in service/death on deferred or death on ill health early retirement.
- Provide indicative values for each benefit based on the data on the member’s record at the time.
- If ill health retirement is chosen by the member we will instruct you as the employer to;
- terminate employment if applicable
- start the ill health process immediately.
- arrange for an ill health certificate to be completed by the IRMP
- provide a Leaver Form
- ask the member to sign the claim form provided
- confirm in writing when the above actions have been taken
Benefit comparisons will only be provided by using the end of life form and will not be provided in any other circumstances. They are for employer use only, to assist in making an informed decision regarding the best course of action for the member and their family.
Active member benefits payable on death
If the member has been dismissed and the ill health process has started:
- The benefits payable would be based on death on ill health retirement, even if a quotation has not been provided to the member or claim forms have not yet been received
- The max tax free lump sum option is payable unless standard benefits would provide higher benefits
If the member has not been dismissed then death in service will apply.
If the member has been dismissed, but the ill health process had NOT started, then the benefits will be processed as death on deferred.
Deferred member benefits payable on death
If the ill health retirement process has started and the ill health certificate has been completed by the IRMP the benefits payable would be based on death on ill health retirement.
Additional Voluntary Contributions (AVCs) will be paid in accordance with the required legislation relevant to the member’s date of leaving. AVCs are paid in addition to the main scheme benefits.
Payment of benefits
The NYPF will not make a payment to any beneficiary if that decision could be construed as perverse. For example, paying the death grant to the mother of the deceased in accordance with a nomination when we know they were living as a family unit and the marriage happened after the original nomination was made.
Death grants will be paid in accordance with the NYPF’s Death Grant Payment Guidelines.
Any unpaid ill health retirement benefits will be paid to the Estate of the deceased member. In the majority of cases this will be by payment to the deceased’s bank account.
Ill Health Certificates
It is important that you select the correct ill health certificate, if the wrong certificate is completed it will delay payment of the employee’s ill health pension benefits. The interactive and PDF versions of the certificates can be accessed below.
Interactive Certificates
PDF Certificates
Ill Health Review Certificates
A Tier 3 provides a reviewable pension for an employee whose employment is terminated because they are permanently incapable of their current job but are likely to be capable of undertaking gainful employment within three years or before their normal pension age, if earlier.
The employer needs to check the employment status of the employee when payments have continued for 18 months. These payments will stop if gainful employment has been obtained. If the employee is not in gainful employment at the review, the employer has to check the latest medical position. Please see the employer Tier 3 ill health review guide for further information.
The following certificates should only be used where a Tier 3 ill health pension is being reviewed.