If an employee is no longer able to perform the duties of their current role due to ill health, they may be eligible to access their pension benefits through ill health retirement.
Process for Ill Health Retirement
The ill health retirement process begins with you, the employer. You will arrange an assessment of the employee’s eligibility to continue working and communicate with them on the process. The Fund becomes involved later in the process, when it is time to provide the necessary figures.
Who Qualifies for Ill Health Retirement?
To qualify for ill health retirement, an employee must meet two key conditions:
- The must have completed the 2-year vesting period in the scheme.
- They must be incapable of undertaking any gainful employment immediately.
Gainful employment is defined as paid work for at least 30 hours per week, for a period of no less than 12 months.
Next Steps
If you believe an employee is eligible for ill health retirement, you must refer them to an Independent Registered Medical Practitioner (IRMP). The IRMP will:
- Assess whether the employee meets the criteria for ill health retirement.
- Complete the OH3 certificate to certify their findings.
The Pension Fund does not supply a list of recommended IRMPs, so you will need to ensure whoever you choose for this role is:
- registered with the General Medical Council and holds a diploma in Occupational Health medicine (D Occ Med) or;
- an equal qualification issued by a competent authority in an European Economic Area (EEA) state. Or;
- is an Associate, a Member or a Fellow of the Faculty of Occupational Medicine or an equal institution of an European Economic Area (EEA) state. The OH3 certificate the IRMP signs confirms this is the case.
Making the Decision
Once the OH3 certificate and supporting documentation are completed and returned, you as the employer must determine whether the employee meets the criteria for ill health retirement and, if so, which tier of ill health pension will be awarded.
Awarded Tiers
- Tier One: if the employee is unlikely to be capable of gainful employment before their normal pension age, their pension will be enhanced. The enhancement is based on the pension they would have accrued had they continued working until normal pension age.
- Tier Two: If the employee is unlikely to undertake gainful employment within the next three years but is likely to be capable of it before reaching normal pension age, their pension will include their accrued membership, plus 25% of the enhancement that would have been granted under Tier One.
- Tier Three: If the employee is likely to be capable of gainful employment within three years of leaving, or before their normal pension age (whichever comes first), they will receive Tier Three benefits. This includes their pension benefits accrued up to the date of leaving, with no enhancements. These benefits are payable as long as the member is not in gainful employment, for up to three years. Eligibility is reviewed after 18 months.
This tiered approach ensures that each employee’s pension is adjusted based on the severity of their incapacity to work.
Informing the Fund
If you decide not to award an ill health pension, the Pensions Team do not need to be informed about the referral.
If you decide to award an ill health pension
Once you have:
- Obtained an OH3 certificate
- Decided on which tier is to be awarded
- Decided on the effective retirement date
- Informed the employee of the decision
Please contact pensions@cornwall.gov.uk with the employee’s leaving date and send us a copy of the OH3 certificate and the employee’s notification of the award of ill health pension.
For tiers 1 & 2 only, you will need to provide Assumed Pensionable Pay (this is not required for tier 3)
After contact Employerdata@cornwall.gov.uk, who will talk you through the next steps to process the employee’s ill health retirement via i-Connect.
Cost to employer
There is no immediate capitalised cost to you as the employer as a result of ill health retirement. This is because this cost included in the employer contribution rate, set during the Fund’s triennial valuation which takes place every 3 years, and a reasonable expectation is factored into each employer’s contribution rate. However, the employer will be expected to pay any costs associated for a medical referral to your IRMP.
Ill Health Retirement Training
The Local Government Association has training available on ill health retirement that you may find beneficial, this training covers the ill health retirement process for both active and deferred members.