NHSBSA NHS Pensions Retirement

Ill Health Retirement

The new ill-health retirement arrangements, will affect anyone whose request for ill-health retirement is received by NHS Pensions after 31 March 2008 and whose last day of pensionable membership is on or after 1 April 2008.

Anyone whose request was received by NHS Pensions by 31 March 2008 (regardless of the last day of membership), or who is already in receipt of benefits is not affected.

The new rules for ill-health retirement

A two-tier system for ill-health retirement benefit has been introduced for members with at least two years membership in either the NHS Pension Scheme (Amended April 2008) or the New NHS Pension Scheme. Members who are unlikely to ever work again due to ill-health will receive greater benefits under the new arrangements than those who have reasonable prospect of finding alternative work. The tiers and benefits are:

Tier 1 - Member assessed as being unable to do their current NHS job

Where a member is assessed by NHS Pensions and its medical advisers as being permanently incapable of efficiently discharging the duties of their present job in the NHS, they may be awarded early payment of their retirement benefits earned to date. These benefits will not be reduced as they would in, for example, a case of voluntary early retirement where benefits are reduced to cover the extra cost of being paid before the normal pension age and therefore in payment longer. However, benefits under Tier 1 provision will not be increased. In certain circumstances members receiving a Tier 1 award will be able to have their application reviewed for Tier 2.

Tier 2 - Member assessed as being unable to do regular work of like duration.

Tier 2 will apply where a member is assessed by NHS Pensions and its medical advisers as being permanently incapable of doing both their current NHS job AND other regular employment across the general field of employment of like duration. Their previous training, qualifications and experience, and not just the medical conditions, will be taken into account in the assessment of their permanent incapacity.

Tier 2 assessment means entitlement to early payment of the retirement benefits earned to date increased by two thirds of the member’s prospective membership up to reaching their normal retirement age. A minimum increase of four years membership capped at age 60 will apply until 31 March 2016 in the NHS Pension Scheme (Amended April 2008) only.

Do the same arrangements apply to members of the New NHS Pension Scheme?

Yes they do, except that a tier 2 increase is based on prospective membership to age 65 and the minimum increase of four years applicable to Tier 2 benefits up to 31 March 2016 does not apply.

Re-employment following ill-health retirement

Those in receipt of Tier 1 or Tier 2 ill-health benefits, who return to work in the NHS before normal retirement age with earnings above a certain level, may have some of their ill-health pension reduced under the 'Abatement' rules.

In addition, if anyone in receipt of Tier 2 benefits is re-employed anywhere and earns more than the National Insurance Lower Earnings Limit set by HM Revenue & Customs (HMRC)* their Tier 2 pension will be replaced by a Tier 1 pension.

These and other conditions of re-employment are set out in the NHS Pensions’ booklet about early retirement (PDF 492KB)

Terminal illness

A member who is terminally ill and does not expect to live longer than a year, can apply at retirement to exchange all of their ill-health benefits for a one-off, usually tax-free, lump sum payment. To make this exchange, they must have some of their HMRC personal lifetime allowance (LTA) remaining. If the member takes this option, their dependants will still get any pension they are entitled to in full.

(* £4680 in 2008/09).