Any scheme can adopt a rule which allows a member to take an
early retirement pension in the event of incapacity. The definition
of incapacity will differ from scheme to scheme but generally it
will require an inability to carry out one's own job due to
physical or mental illness. Some schemes will require the
individual to be incapable not only of performing their own normal
employment but to be incapable of carrying out any occupation at
all. Clearly, the latter is a more difficult criteria to meet than
the former.
Another criteria which is required is that the medical condition
is permanent i.e. the condition is likely to last until the person
dies or reaches the normal retirement age of the scheme. Most
schemes will have this criteria written into its rules but, where
this has not happened case law, would now suggest that such a
criteria can be presumed.
Many schemes will allow early payment of pension in the event of
permanent ill health but will reduce the pension for early payment.
Others will make no such reduction while others will increase the
pension in acknowledgement of the fact that the scheme member will
not work again. The maximum pension that any scheme can give is the
maximum that would have applied had the member continued in work to
the scheme's normal retirement age but based on final salary at the
date of early retirement.
The decision to grant an ill-health pension may lie with the
company only, the trustees only or both the company and the
trustees. Case law has dictated that such a decision, whichever
body makes it, has to be in accordance with the scheme rules and
supported by medical evidence. It is for the decision maker to
determine what evidence is required and who should provide it. In
recent years this has become an increasing area of dispute for
scheme members as companies and trustees tighten up their
procedures for granting such pensions due to the cost involved.
Case law (Edge v. the Pensions Ombudsman & Anor) has laid
down that a decision to refuse payment of an early pension can only
be challenged if one of the following principles have been
infringed:
- The decision making body must ask the correct questions.
- They must direct themselves correctly in law; in particular
they must adopt a correct construction of the scheme rules.
- They must take into account all relevant but no irrelevant
factors.
- They must not arrive at a perverse decision i.e. a decision to
which no reasonable body could arrive.
In recent years this has become an increasing area of dispute
for scheme members as companies and trustees tighten up their
procedures for granting such provisions due to the cost
involved.
Click here
to download our leaflet - ill health early retirement.
Q & A's
Ill health means your physical or mental health is bad enough to
stop you from carrying on working with your employer or which
seriously reduces the amount you can earn. Most schemes would have
ill health early retirement provisions in their scheme rules which
define the criteria you need to meet. The scheme may pay an
enhanced pension.
The decision on whether to pay pension is usually determined by
what the scheme rules say. If you are too ill to work at present
but are likely to be able to work any time before you reach your
scheme pension age then the scheme rules may decline to pay you any
pension. It is usual for scheme rules to have provisions to pay
pension only if the illness is permanent, such that there is no
doubt as to whether, or not, you will be able to work any time
before your scheme pension age.
The Trustees and or employer should, when considering your
claim, check what is allowed in the rules of the scheme and seek
supporting medical evidence from your doctor and/ or an independent
doctor before arriving at their decision.
The scheme rules will determine how much the pension can be paid
to you.
Once they start paying pension to you they cannot take it away
unless your personal circumstances change before you reach your
scheme normal retirement date and the scheme rules allow. For
example, if you get better and the new medical evidence suggests
that you are able to work, then the scheme rules may allow the
trustees and/or employer to reduce or stop paying any pension while
you are fit to work or you reach scheme normal retirement date, if
earlier.
The decision on how much to award you lies with the scheme. If
they have followed the correct procedures, asked the right
questions, applied the scheme rules and only taken account of
relevant evidence, it will be very difficult to challenge their
decision.
