Ill-health early retirement – Council’s inactivity found to be “tantamount to maladministration”

A local authority’s recent “roasting” by the Pensions Ombudsman concerning the Council’s delay in processing an employee’s ill-health retirement pension following her diagnosis with advanced cancer, is one most employers will not want to experience!

The Ombudsman found that the employee had suffered ‘immense financial strain’ following seven-and-a-half months without any income or pension benefits due to the Council’s maladministration. The Council was ordered to backdate the employee’s pension payments to the date she first went on sick leave and pay a further £3,000 award in recognition of the distress and inconvenience caused.

The matter started in September 2015 when Mrs I, an employee of the Council, was diagnosed with advanced cancer. She commenced sick leave in October 2015 and, as per the Council’s policy, was paid in full for the first six months and then at half-pay for the next six months.

Mrs I’s sick pay ended in October 2016, but the Council did not assess her for ill-health retirement until June 2017. Following an occupational health report, the Council wrote to Mrs I to advise they would dismiss her on capability grounds with effect from 31 May 2017 and her pension would be paid from 1 June 2017. However, the Council did not process Mrs I’s pension until February 2018, meaning that from April 2016, when her sick pay was halved, until February 2018, when she received her pension, she was without a full income.

The Council admitted that the case had not been handled appropriately or timely, acknowledging the critical delay of seven months between the expiry of Mrs I’s sick pay and her assessment for ill-health retirement. Mrs I alleged she had suffered injustice as a result of maladministration by the Council and stated that her complaints through the Local Government Pension Scheme (LGPS) Internal Dispute Resolution Procedure had been ignored. She, therefore, considered that the Council’s failures did come within the Ombudsman’s jurisdiction. The Council argued that the matter was purely an employment issue and outside the jurisdiction of the Ombudsman. The latter disagreed.

Determination

The Ombudsman found the Council’s failure to take appropriate steps before the end of Mrs I’s sick leave to ensure the payment of her ill-health retirement benefits was “tantamount to maladministration”. She was left without pension provision from October 2016 until February 2018, and although the Council backdated the pension payments to June 2017, Mrs I was still left without a pension for seven-and-a-half months. Had the Council administered the scheme and process correctly and taken steps to assess Mrs I for ill-health retirement in a timely manner, the pension provision would have been available from the date her entitlement to sick pay expired. The Ombudsman quoted from the central government guidance in its decision, noting “in the context of ill-health retirements, the role of the employer begins a long time before employment has been terminated and the question of entitlement to an ill-health benefit arises”.

Our comment

This decision emphasises that employers should not neglect employees on long-term sick leave. It is important to maintain an up-to-date understanding of the reason behind their sickness absence and the nature of their illness, to ensure that an assessment for ill-health retirement can take place as soon as appropriate. It should never be assumed that an employee receiving sick pay is not eligible for ill-health retirement until their sick pay expires. Employers should also ensure that if a decision is reached to award an employee a pension, that they make the relevant arrangements to initiate prompt payment of the pension. Employers should appreciate that a failure to understand the urgency behind processing ill-health retirement can have a significant impact on an employee’s already ill health.

In this case, the Ombudsman also highlighted the fact that the Council failed to respond to the adjudicator’s opinion within the agreed timescale. He stated that this demonstrates the failure of the Council to treat Mrs I’s complaint with the degree of respect and care that one would expect from an employer to its employees, especially given Mrs I’s serious illness. If employers are faced with a Pensions Ombudsman complaint, they should ensure they take appropriate steps to cooperate with the Ombudsman and meet any given deadlines.

This is not the first time the Pensions Ombudsman has been critical of delays in processing ill-health benefits. As a result, the Ombudsman is likely to treat similar situations in future with the same high level of seriousness.

Further information

If you require further advice on ill-health retirement or pension complaints, please contact Alice Kinder.

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