Retirement due to ill health is often an emotional, demanding time and a complex issue to resolve.
It may be proposed by either the employer or the employee. It is then assessed based on physical, mental or psychological impairment in relation to the specific job.
The procedure normally takes place over a long period of time with many internal procedures having to be completed. Statements may be required by both the employer and the employee and by the treating medical specialists. Employees do have the right to refuse a medical examination but a refusal could be justification for ill-health retirement being refused.
Medical reports would vary depending on circumstances but would typically include information such as x-rays, blood tests, ECG and histology results and reports by other health care professionals.
There are certain steps employers can take to ensure that this facility is not abused and that individuals are treated fairly.
If there is a high incidence of applications for retirement due to ill health on psychiatric grounds, for example depression, post traumatic stress disorder or due to back problems there should be further evaluation of the environment and conditions to establish, and eliminate, the causes.
Ill health retirement options
The process is normally instigated by the employer when an employee has been absent for a long period, or periods, due to ill health and is unlikely to return to work.
The employer may also consider the option of dismissal on the grounds of incapacity as a result of the long-term illness. However if an ill-health retirement benefit is provided by the employer they must first consider the employee's entitlement to that benefit before dismissing them for ill-health.
It is likely to be considered as unfair dismissal if the employer chooses to dismiss the employee on the grounds of incapacity.
Retirement due to ill health - steps to follow
The retirement due to ill health application will be followed by an extensive evaluation process and will be considered in terms of the employee's;
- Job and sick leave record. The duration of the condition and the period, or periods, away from work;
- Existing functional capacity considering factors such as effort, tolerance, endurance and psychological demands;
- Disability, to see if there are any reasonable changes in duties or work environment that may accommodate the employee;
- Potential to perform alternative work taking into account their education and training, work experience, skills and age;
- Potential for rehabilitation and reskilling;
- Reasonable expectation that they will be able to work again before the normal retirement age of the pension scheme.
There may be a requirement for additional medical evaluations to help make the decision. During this process there are frequently differences of opinion between the employer and the employee, and even their respective medical specialists, which have to be negotiated.
As this process can be very traumatic for the employee at the time when they are already under stress it is important that this matter is handled sensitively and quickly by the employer.
Pension options with retirement due to ill health
There are significant differences in how these are calculated depending on whether you are on a defined benefit or a defined contribution pension scheme.
In addition to the pension the employer may provide accident, or disability, insurance.
In the case of a defined contribution scheme the payout will be the value of the fund at the date of leaving work. In this case it is often the employee, especially if they are quite young, who will try to extend their employment and find an alternative to retirement due to ill-health. Exhausting all of the possible options above.
With a defined benefit pension there may be a number of options depending on the scheme rules and interpretation by the trustees.
Most pension schemes provide a pension if you can no longer work.
The payouts and calculations of the pension can vary a great deal. Ideally they will work out the pension as if you had worked through to the normal retirement age (normally about 65).
Other schemes may not be as generous, and it may depend on whether you are considered incapable of any work, or just the job you currently hold. This interpretation is frequently a cause of dispute in pension schemes. Particularly with disability insurance provided for by the employer alongside the normal pension scheme.
It is advisable to get the opinion of a third party specialist to evaluate your best pension option. There are usually a number of alternatives with regard to the pension, lump-sum payments and tax payments. The final decision will be further complicated by the fact that the “best” may depend on how long you are going to live.
There is no "one size fits all" and every case must be carefully evaluated depending on your personal circumstances and the pension fund rules and practices.
Retirement due to ill health – the implementation
If the decision is made that retirement due to ill-health is appropriate, a date should be agreed that will give the company sufficient time for them to prepare. It is advisable for both parties to keep a detailed record of actions taken during all stages of the procedure.
Patience, compromise and empathy will be essential inputs in amicably resolving this sensitive and stressful issue.
Retirement Health: A critical element for your enjoyable and comfortable retirement