Ill health retirement

If you’ve paid into the LGPS for at least 2 years, and become too ill to work, you may be able to have your pension benefits paid to you, regardless of your age, without reductions being applied. Your pension benefits may also be increased depending on your medical condition.

This page explains how ill-health retirement works, the difference between the 3 ill-health retirement tiers, and the process involved.

To be entitled to any ill-health pension in the LGPS you must be:

1. Permanently unable to do your own job until your Normal Pension Age
2. Not immediately able to take up a job working a minimum of 30 hours a week for a period of at least 1 year

If you think you may meet this criteria, 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 employer will refer your case to an Independent Registered Medical Practitioner (IRMP).

If you have more than one LGPS employment, you will be assessed for each of them separately. It is possible to meet the criteria in one employment and not in another.

If you also have a Buckinghamshire LGPS pension account that you no longer pay into (deferred pension account), you can also ask your former employer to consider your eligibility to have this pension paid early due to ill-health.

Find more information about releasing a deferred pension due to ill-health

The employer cannot make a decision about whether someone would qualify for an ill-health retirement until the IRMP has completed their assessment.

The IRMP is a health practitioner qualified to carry out medical assessments for pension purposes.

The IRMP’s job is to decide if you qualify for ill-health retirement and if so, which tier you should receive. 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.

In their review of your case, the IRMP will use information provided by your GP, consultants and employer. 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.

You will need to give your consent to the IRMP to view your medical records. You can say no, but it’s unlikely the IRMP will have enough information to assess you against the criteria.

How long the process takes 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 may wish to contact your employer for an update.

If you qualify for ill-health retirement, the IRMP will assign you a tier. Tiers are assigned based on how likely it is you could return to working at least 30 hours a week before your Normal Pension Age in any other job. They also determine what pension benefits are payable and how long for.

The 3 tiers are set out in the table below. The eligibility criteria for each tier is in addition to the initial qualifying criteria for ill-health retirement explained earlier on this page.

A tier 3 pension can only be paid for a maximum of 3 years. After 18 months of receiving a tier 3 ill-health pension, your employer will carry out a review. An IRMP will once again need to make an assessment to recommend one of the following outcomes:

• you no longer qualify for ill-health retirement and your tier 3 pension will stop immediately
• you continue to qualify for tier 3 ill-health retirement and your tier 3 pension will continue to be paid for the remainder of the 3 years
• you now meet the qualifying criteria for a tier 2 ill-health pension, and you will be uplifted from the date your employer made the decision

You don’t have to wait for the 18 month review to ask your employer to assess your qualification for being uplifted to a tier 2. You can ask your employer to look into this if something changes at any point while the tier 3 pension is in payment and up until 3 years after it stops being paid.

If you qualify for tier 2, you will receive the 25% enhancement as described in the table above. If you have already received a lump sum payment when your tier 3 ill-health pension was paid, this will be deducted from any tier 2 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 3 to a tier 2, it is not possible to move from a tier 2 to a tier 1 or a tier 3 to a tier 1, regardless of any changes to your medical condition since the initial assessment.

The tier 3 pension will end after 3 years.

If you haven’t been uplifted to a tier 2, your LGPS pension then becomes deferred and will be payable without reductions when you reach your Normal Pension Age. You can choose to take it from age 55, but reductions will be applied for taking your pension early.

You will need to provide us with 3 months’ notice to put the deferred pension in payment.

Ultimately, it is up to your employer to decide if you meet the qualification criteria for ill-health retirement which tier should apply. We will not be informed of the outcome of any assessment 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, you are entitled to appeal under the Internal Dispute Resolution Procedure (IDRP).

If you qualify for an ill-health pension, your employer needs to provide us with:

• 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 these are fully complete and have been provided to us can we calculate your pension benefits and write to you with your options for payment.

Once we have all the information we need from your employer to calculate your pension you will be provided with the retirement pack. You can then choose how and where you would like your pension paid.

Find more information about the retirement process.

We use pay information provided by your employer to calculate your LGPS pension benefits.

If you have had time off due to sickness that has resulted in a reduction in pension contributions, it will not impact on the calculation of your pension. This is because your employer provides us with a figure that we call ‘Assumed Pensionable Pay’ (APP) to calculate your pension, rather than your actual pay. The APP is the amount you would have received had you worked as normal. For more information see Time away from work

We also use APP to calculate the enhancements payable on tier 1 and tier 2 ill-health pensions.

Additionally, if the IRMP certifies that you reduced your hours due to the medical condition that led to your ill-health retirement, the APP will be worked out using the pay you would have received had you not reduced your hours.

There is additional protection 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 since then
• have not taken flexible retirement

If you meet the above criteria, your pension benefits will not be any less than they would have been under the scheme rules before 1 April 2008. You won’t need to apply for this protection, we will check if you qualify automatically.

Annual pension that is paid to you is subject to income tax

Additionally, there is a limit to how much you can build up in pension savings over a year (annual 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 which will increase the overall value of your pension savings for tax purposes.

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:

• annual allowance
• lifetime allowance