If one of your employee’s will need to stop working because of because of ill-health you should contact us as the member may be eligible to have their pension paid early.
- let you know the eligibility criteria that the member will need to meet,
- For some schemes Ill Health retirement may be subject to the approval of the relevant scheme committee,
- advise what medical evidence will be required from the member,
- send a questionnaire for you to complete and return to us;
- send a form for the member to complete and return giving consent for us to obtain medical reports. Only members who are under age 55 (or under age 50 if they have a Protected Pension Age) may need to provide a medical report.
- Pay across the final month’s the final month’s contribution in your normal monthly contribution submission.This should be adjusted if the member leaves part way through a month.
- Submit the date of leaving on your submission.See Benpal for guidance.
The benefits that are payable will depend on the scheme the member is in:-
Defined Contribution Scheme member (including Hybrid members)
If the member satisfies the eligibility criteria they will have their current fund value paid to them. Depending on their medical condition, there may be an option for the member to purchase an 'enhanced' annuity (pension).
Please advise your employee that it is unlikely that benefits will be paid out on the actual retirement date. This is because if a member remains in the Scheme right up until the retirement date, their final contribution will not be paid into the Scheme until after this date.
The final value of the fund payable will include the final contribution which needs to be invested in the relevant fund. If members are making financial decisions around their retirement date, they need to bear in mind that there may be a delay of two to three months before benefits are paid.
If the early payment of benefits is approved, the process will follow the normal retirement process. Once the benefits have been paid, the member's record will be closed, as no benefits will remain in the Scheme.
Defined Benefit scheme member
If the member satisfies the eligibility criteria they will have their pension calculated differently depending on the scheme they are in. To determine the benefits payable in respect of ill health retirement, please see your relevant scheme information.
For Defined Benefit members the committee have the right to request updated medical evidence and could reduce or suspend the member’s pension if their eligibility changes in the future.
Where there is medical evidence that the life expectancy of a member is less than a year a cash lump sum may be paid instead of a pension. We would need evidence from a medical professional to confirm the employee’s life expectancy.
Cash lump sum benefits paid on serious ill-health grounds are tax-free providing that they do not exceed the member's available Lifetime Allowance.
If it seems likely that a member may qualify, you should inform the Administration Team as soon as possible who will then provide guidance on how to proceed.