10. Ill-health retirement
If you’ve paid into the LGPS for at least two years, and become too ill to work, you may be able to have your pension benefits paid to you immediately, regardless of your age. If your pension is paid early on the grounds of ill-health, it will not be subject to early retirement reductions and may also be increased depending on your medical condition.
To be entitled to any ill-health pension in the LGPS you need to be:
- Permanently unable to do your own job until your Normal Pension Age (see glossary)
- Not immediately able to take up a job working at least 30 hours a week for at least 1 year.
This page explains how ill-health retirement works, the difference between the three ill-health retirement tiers, who is eligible, and the process involved. This is general information only. The Pensions and Investments Team are not involved in the assessment procedure itself. Your employer will be able to answer any specific questions about your individual circumstances.
If you have a Buckinghamshire LGPS pension, but are no longer paying into the scheme, you’re a deferred member. You may still be able to have your pension benefits paid early due to ill-health, but the process is a little different.
For more information, visit the deferred section of the website.
Active members applying for ill-health retirement
If you believe you may qualify for ill-health retirement you should begin the process by discussing it with your employer.
If you and your employer agree that you may qualify for an ill-health retirement, your case will need to be assessed by an Independent Registered Medical Practitioner (IRMP).
The employer cannot make a decision about whether someone would qualify for an ill-health retirement until the IRMP has made an assessment. This is set out in the LGPS regulations.
What the IRMP will do
The IRMP is a health practitioner qualified to carry out medical assessments for pension purposes. You will need to give your consent to the IRMP to view your medical records in order to carry out the review. You can say no, but if you don’t consent it will be very difficult for the IRMP to make an assessment as they will not have enough information to be able to make a decision.
The IRMP’s job is to decide if you qualify for ill-health retirement and if so, which tier you should receive (see below information on the three tiers).
Remember, the IRMP will be looking for evidence that you satisfy the criteria for ill-health. You can help the process by ensuring both your employer and the IRMP understand your medical condition fully and the way it impacts on you carrying out your role.
Sometimes, the IRMP may request to speak to you directly, either in person or over the telephone. But often the assessment is completed without the need for you to meet with them. The IRMP will use information provided by your GP, consultants and employer to make an assessment.
How long the process will take depends on your individual circumstances. Remember, the IRMP needs to collect evidence from your GP and consultants. They will write to them to request information about your medical condition and history. They may also ask for additional details after receiving this information if they need anything further to make an assessment. We understand that this can be a difficult period of waiting, but you should expect the process to take some time. If you don’t hear anything after four weeks, you can contact your employer for an update.
The three tiers
There are three types of ill-health retirement active members can receive. These types are called tiers, and they determine what pension benefits will be paid, how long for and who would qualify for them.
To qualify for tier three ill-health retirement, you need to be permanently unable to do your own job until your Normal Pension Age, but though you will be immediately incapable of doing any job, it is determined that you are likely to be able to take up some sort of job where you are working at least 30 hours a week within three years of leaving, or before your Normal Pension Age if that date is earlier.
If you qualify for tier three, you will receive the total value of pension benefits built up until your last day of service. Your pension benefits will not be reduced due to being released early. These pension benefits will be payable for a maximum period of three years from the date of leaving. There is more information about the options when tier three stops later on this page.
To qualify for tier two ill-health retirement, you need to be permanently unable to do your own job until your normal pension age, but though you will be immediately incapable of doing any job, it is determined that you are likely to be able to take up some sort of job where you are working at least 30 hours a week before you reach your Normal Pension Age.
If you qualify for tier two, you will receive the total value of pension benefits built up until your last day of service. You will also receive an additional enhancement of 25% of the value of the pension you would have received had you continued to work until your Normal Pension Age. Your pension benefits will not be reduced due to being released early. Tier two pension benefits are not reviewed at a later date and you will receive a pension for life.
To qualify for tier one ill-health retirement, you need to be permanently unable to do your own job until your normal pension age, and also unlikely to be able to take up any job working at least 30 hours a week until your Normal Pension Age.
If you qualify for tier one, you will receive the pension you would have built up had you remained in the scheme contributing until your Normal Pension Age. Your pension benefits will not be reduced for releasing them early. Tier one pension benefits are not reviewed at a later date and you will receive a pension for life.
An employer decision
Ultimately, it is up to your employer to decide if you should be entitled to receive ill-health pension benefits and which tier should apply. The Pensions and Investments Team will not be informed of the outcome of any assessment for ill-health retirement until the retirement is approved. If the retirement is not approved, we will not be contacted by your employer.
If you are unhappy with the outcome of an assessment, you should discuss this with your employer in the first place. If after discussing this with your employer, you are still unhappy with a decision about an ill-health retirement, you’re entitled to appeal the decision under the Internal Dispute Resolution Procedure (IDRP).
What we need from your employer
If you qualify for an ill-health pension, your employer needs to provide us with the following documents:
- a leaver form
- a final pay calculation (if applicable)
- signed consent from you to agree to share your medical records with us
- an LGPS medical certificate
Only once we have all of these things, completed fully and correctly, can we calculate how much your pension benefits will be. If anything is missing or incorrect, we will request this from your employer. Sometimes we may ask for additional pay information to ensure that we are assessing your pension benefits correctly.
Your pay information
As you may be aware, we use your pay information to calculate your LGPS pension benefits. You may be concerned that you have had some time off work due to sickness and wonder how this will affect the calculation of your pension. When someone is off sick, the employer provides us with a figure that we call ‘Assumed Pensionable Pay’ (APP). This is how much you would have received had you worked as normal. Therefore the calculation of your pension will not be affected by any sick leave.
You can find out more about this on our time away from work webpage.
We also use APP to calculate the ill-health retirement enhancements payable for tier one and tier two.
If you were paying into the LGPS on 31 March 2008, were aged 45 or over on that date, have been continually paying into the LGPS and have not taken flexible retirement, you have additional protection on your ill-health pension benefits. This protection means your pension benefits will not be any less than they would have been under the scheme rules before 1 April 2008.
Paying your pension
Once we have all the information we need from your employer, we will calculate your pension benefits and provide you with a retirement pack. The retirement pack will allow you to choose how and where you would like your pension paid.
For general information on the process and what the pack will include, you can read the retirement process guide.
When we receive your fully completed forms, we will aim to pay your pension the month after your retirement date. Pensions are paid in arrears on the last working day of the month. If your retirement date has already passed, we will calculate any backdated pension owed to you and pay this as soon as possible, along with any lump sum payment you have opted for.
My pension online
In order to receive your retirement pack as fast as possible, please ensure you have registered for ‘my pension online’. This is the online portal that allows you to access your pension record, change your personal details and receive communications directly from the Pension and Investments Team.
You will also find your payslips and p60s published to ‘my pension online’ when you start to receive pension payments. As soon as your retirement pack is ready, we will publish it instantly and email you to let you know.
If you haven’t registered, or you’ve opted out, we will post your retirement pack out to you. Please be aware that it could take up to 5 working days or more for you to receive this.
Pension that is paid to you is subject to income tax. Also, the government has certain tax controls on pension savings limiting how much you can build up in both a year (annual allowance) and over a lifetime (lifetime allowance) before you need to pay a tax charge. Though these will not impact on everyone, you should be aware of the implications, particularly if you receive an enhancement (tier 1 or tier 2) on your pension.
You may be exempt from an annual allowance check if the IRMP certifies that you are unlikely of being capable of taking on any other paid work in any capacity until state pension age.
For more information about both the annual and lifetime allowances, refer to the tax controls section of our website.
More information about tier three
If your ill-health retirement was assessed as tier three, the pension is payable for a maximum period of three years. While in payment, you can request that your former employer considers your eligibility for a tier two ill-health award. An IRMP will once again need to make an assessment. If the outcome is that you qualify for tier two, the tier two ill-health pension benefits will be payable from the date of determination. This is the date a decision is made by the employer. The employer can decide to move someone to tier two up to three years after a tier three ill-health pension has stopped being paid.
If you qualify for tier two, you will receive the relevant enhancement on your pension benefits. If you have already received a lump sum payment when your tier three ill-health pension was paid, this will be deducted from any tier two lump sum payable to you. This is because you can only take 25% of your pension pot as a tax-free lump sum payment.
Please note, while it is possible to move from a tier three to a tier two, it is not possible to move from a tier two to a tier one or a tier three to a tier one, regardless of any changes to a medical condition since the initial assessment.
When tier three ends
The tier three pension ends after three years.
The pension then becomes deferred and payable without reductions from your Normal Pension Age. You can choose to take it from age 55, but reductions will be applied for taking your pension early. We will require the usual three months’ notice to put a deferred pension into payment.
If you’re aged 55 or over at the date your tier three pension stops, we will write to you to offer your pension benefits on this date.
Last updated: 31 March 2021