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For members of the Local Government Pension Scheme in England and Wales

Ill health retirement

The LGPS protects you by paying your pension straight away if you are too ill to work at any age.

Overview

If you have to leave work because of illness, your LGPS benefits may be paid straight away. Ill health benefits can be paid at any age. Your pension would not be reduced for early payment. Your pension may be enhanced to make up for your early retirement.


Protection for you and your family 01:31

How the LGPS looks after you and your loved ones by providing protection if you have to retire due to ill health and a range of death benefits.

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Visit the Videos page to watch more of our ‘Pensions made simple’ videos, including Welsh language versions.

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Qualifying for ill health benefits

You must have met the two year vesting period in the LGPS to qualify for ill health benefits. Your employer must be satisfied that:

  • you are permanently unable to do your job until your Normal Pension Age, and
  • you are not immediately capable of undertaking gainful employment.

Your employer must get the opinion of an independent occupational health physician appointed by them before it makes its decision.

Your Normal Pension Age in the LGPS is linked to your State Pension age. You can Check your State Pension age on the Government’s website.

Gainful employment means paid employment for at least 30 hours a week for a period of at least a year.

Ill health benefits can be paid to you at any age. Your benefits will not be reduced because they are being paid early. In some cases, your pension will be increased to make up for your early retirement. The level of benefits depends on how likely you are to be capable of gainful employment after you leave.

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Ill health tiers

What you are paid depends on which benefit tier you qualify for. Your employer decides on the appropriate tier. The benefits payable under the different tiers and the qualifying conditions are set out below.

Tier 1

You qualify for Tier 1 if you are unlikely to be capable of gainful employment before your Normal Pension Age. The ill health benefits you would receive are:

  • the pension you have already built up on your date of leaving
  • no reduction for early payment
  • plus the pension you would have built up in the main section of the LGPS from your leaving date to your Normal Pension Age.

A Tier 1 pension is paid for the rest of your life. The increase to your pension under Tier 1 is based on your Assumed Pensionable Pay. You can find out more about Assumed Pensionable Pay in the next section.

Tier 2

You qualify for Tier 2 if you are unlikely to be capable of gainful employment within three years of leaving, but you are likely to be capable of gainful employment before your Normal Pension Age. The ill health benefits you would receive are:

  • the pension you have already built up on your date of leaving
  • no reduction for early payment
  • plus 25% of the pension you would have built up in the main section of the LGPS from your leaving date to your Normal Pension Age.

A Tier 2 pension is paid for the rest of your life. The increase to your pension under Tier 2 is based on your Assumed Pensionable Pay. You can find out more about Assumed Pensionable Pay in the next section.

Tier 3

You qualify for Tier 3 if you are likely to be capable of gainful employment within three years of leaving, or before your Normal Pension Age, if this is earlier. You would receive the pension you have built up on your date of leaving. it would not be reduced for early payment. Your Tier 3 pension is paid temporarily. It will stop when the first of these events happens:

  • your Tier 3 pension has been paid for three years
  • you start gainful employment
  • you become capable of gainful employment.

If you reach your Normal Pension Age while your Tier 3 pension is being paid to you, it will not stop. Your former employer must assess whether you are capable of undertaking gainful employment.

After your Tier 3 pension is stopped, it will normally become payable again from your Normal Pension Age. You may take it earlier. Your pension fund will provide you with information about your options when your Tier 3 pension stops.

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Assumed Pensionable Pay

Assumed Pensionable Pay is used to work out the increase to your pension when you are awarded Tier 1 or 2 ill health benefits. Assumed Pensionable Pay is the average pay you receive in the period before you leave due to ill health retirement. It is based on three months’ pay if you are paid monthly or 12 weeks’ pay if you are not paid monthly.

There are sometimes adjustments to the calculation of Assumed Pensionable Pay:

  • If your pensionable pay was reduced because you were away from work, your employer will generally ignore the reduction when it works out your Assumed Pensionable Pay. This will be the case if you are absent because of sickness or injury, authorised unpaid leave or trade dispute.
  • If the pay you received in the period leading up to your leaving date is lower than the pay you would normally receive, your employer can use a higher pay to work out your Assumed Pensionable Pay. Your employer must have regard to the pensionable pay you received in the last 12 months when they do this.
  • You may have been working reduced hours in the period leading up to your leaving date. An independent medical practitioner must certify whether you were working reduced hours because of the condition that led to your ill health retirement. If you did reduce your working hours because of that condition, your employer will work out your Assumed Pensionable Pay based on the pay you would have received if your hours had not been reduced.
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Ill health retirement and paying extra

Special rules can apply if you are paying extra pension contributions in the LGPS and you retire with an ill health pension. You can find out more in this section.

Additional Voluntary Contributions (AVCs)

If you are paying Additional Voluntary Contributions (AVCs) in the LGPS and you retire with an ill health pension, there are no special rules. You will have the same choices as you would have had if you took your pension in normal health. You can find out more about your options in the Taking your pension and paying extra section.

Additional Pension Contributions

You may have bought additional pension by paying Additional Pension Contributions (APCs) or Shared Cost APCs. When you take an ill health pension, it will include the extra pension that you have paid for by lump sum or regular payments. The extra pension will not be reduced for early payment. If you qualify for a Tier 1 or 2 ill health pension, you will be credited with all the extra pension that you set out to buy, even if you have not completed full payment for it.

You can choose to swap some of the extra pension for a cash lump sum in the same way that you can exchange your main LGPS pension.

Additional Regular Contributions (ARCs)

When you take an ill health pension, it will include the extra pension that you have bought by paying Additional Regular Contributions. The extra pension will not be reduced for early payment. If you qualify for a Tier 1 or 2 ill health pension, you will be credited with all the extra pension that you set out to buy even if you have not completed full payment for it.

You can choose to swap some of the extra pension for a cash lump sum in the same way that you can exchange your main LGPS pension.

Buying extra years in the LGPS (added years)

If you are paying for extra years when you take an ill health pension, you will normally be credited with the whole extra period of membership that you set out to buy. This will be the case even if you have not completed full payment for it.

The extra membership is included in your membership built up before 1 April 2014. The extra benefits you will get are based on your final pay when you leave the Scheme. See the section on How your pension is worked out for more information.

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Ill health retirement – special cases

In some cases, your ill health pension will be worked out differently. You can find out more about the differences in this section. The rules covering these special cases can be very complicated. Your pension fund will let you know if you are affected by them.

  1. If you were awarded an ill health pension before 1 April 2008 or if you were awarded a Tier 1 pension after 31 March 2008, then your pension will not be increased if you retire due to ill health again.
  2. If you were awarded a Tier 2 pension after 1 April 2008, then any increase to your pension will be restricted if you retire due to ill health again. If you are awarded a Tier 1 or 2 ill health pension, then the increase to your pension will be based on a maximum of 75% of the number of years from your original ill health retirement to your Normal Pension Age, less the number of years of active membership since the first ill health retirement.
  3. You may qualify for additional protection apply if you:
  • were paying into the LGPS on 31 March 2008
  • were age 45 or over on that date, and
  • have been in continuous membership of the LGPS.

If you qualify for a Tier 1 or 2 ill health pension, your pension fund will check whether the increase to your pension is at least as good as it would have been under the LGPS rules in force before 1 April 2008. If it is not, your pension will be increased further. This protection will not apply to you if you took flexible retirement before your ill health retirement.

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