A recent case heard by the deputy Pensions Ombudsman has emphasized the burden on employers when processing ill-health retirement benefits for terminally ill employees, to ensure that they do so as quickly as possible.

Mrs N was employed by Derbyshire County Council (DCC) and was a member of the Local Government Pension Scheme (LGPS). In June 2014, she was diagnosed with breast cancer and shortly after that diagnosis was informed by DCC of the application process for ill-health early retirement benefits.

Just short of 18 months later in November 2015, sadly, Mrs N was informed that her cancer had spread to the brain and she needed radiotherapy. She was informed by DCC of her two different options for ill-health early retirement. She took the option which would pay out, amongst other things, a survivor’s pension of £7,027.08 annual pension and a £117,882.68 death grant.

The early retirement process was triggered and the Council, with the input of Mrs N’s medical team, instructed an Independent Regulated Medical Practitioner (IRMP). On 12 January 2016, The IRMP confirmed the medical team’s prognosis that Mrs N had a life expectancy in months rather than years. DCC approved Mrs N’s application for early retirement on the grounds of her ill-health and the last day of her employment was set as 31 January 2016.

One day before, however, on 30 January, Mrs N passed away and so died in service. The survivor’s pension was the same as it would have been had she died after 31 January, but the death grant was smaller (£85,686). Mrs N’s husband, Dr N, requested that the date her employment ended be changed to a date before her death but both the employer and the Administering Authority refused to do so. They argued that legislation did not permit a retrospective change to the termination date of employment.

Dr N took his complaint to the Pensions Ombudsman. He argued that the date his late wife’s employment terminated should have been the same date as her application for ill-health early retirement. DCC reiterated its position that there was no provision which permitted any retrospective changes to the employment dates.

The Ombudsman ruled that whilst there may not be such provision, DCC had unnecessarily risked Mrs N’s benefits by setting 31 January as an end date. It was clear from correspondence that Mrs N wanted her application actioned as soon as possible and it was not her responsibility to be the driver of this process. That was DCC’s responsibility in light of the circumstances.

The Ombudsman directed DCC to pay the difference between the smaller and larger death grant, interest on this sum and any tax that might be payable on this sum.

Although the Ombudsman found that DCC had otherwise dealt with the ill-health application quickly, the lesson to learn is that, for terminally ill employees, LGPS employers should be looking to agree a retirement date with the employee that is as soon as possible after the date that ill-health retirement is approved.

Further information

For more information, please contact Doug Mullen.