There may be times when, due to deteriorating health or disability, that you are able to continue working until your normal retirement age. This understandably is a daunting prospect for most people due to the loss of income. Normally, you won't be able to access your pension until the age of 55 (rising to 57 from 2028) - although this may vary dependent upon your rights under the pension scheme you are part of. In these situations, it may be appropriate to establish whether you are able to access your pension benefits earlier due to your health. We call this Ill Heath Early Retirement (or IHER for short).
What you need to know:
Ill health early retirement requires an assessment to be made to understand the impact of your illness on your ability to continue working until your normal retirement age. This assessment is based on the medical information available, including any diagnosis, and a forecast of how this will continue to impact you into the future.
It's important that we talk openly and honestly about your health and the impact this is going to have on you as there are strict criteria behind the assessment process. For example, less severe cases where medical professionals believe you should be able to make a recovery that allows you to return to work - even if that's some way off in the future - are likely to be declined. We would also expect the business to make reasonable adjustments to support you returning or remaining in work. A good starting point is to talk your medical professionals about your health and the impact it's going to have in the future - it would be expected that this is a consultant or specialist and not a GP, so if you haven't been referred to a specialist for support then you should do so.
How to arrange an assessment:
In order to be considered for ill health early retirement, you must go through the assessment process. The start of this is a referral to the businesses Occupational Health provider. They will consider the facts, which can sometimes involve a face-to-face clinical assessment. If the Occupational Health provider believes you meet the criteria for the assessment process, they will make the recommendation to refer you for a further independent medical assessment who will correspond with your medical team to better understand your health, current treatment and treatment options, and a long-term prognosis.
They will compile a report which is sent to your pension provider for consideration.
The decision to grant ill health early retirement rests with the pension trustees of your pension provider, in line with the terms of your pension scheme rules and considering whether the criteria has been met under the relevant governing legislation. Should you be granted ill health early retirement, your pension provider will set out your options to you, including any potential impact for the loss of your future earnings until your normal retirement age.
You have the ability to appeal this decision, and this can be done at a future point if further medical evidence is available that warrants a re-evaluation of your circumstances and the decision that was made.
Different types of ill health early retirement:
Different criteria may apply depending upon the pension scheme you are in and the rules that apply to that scheme. For most schemes, there are two different categories of ill health early retirement:
- Partial incapacity - this means your health will prevent you from carrying out your normal job which has a serious and permanent impact on your earnings capacity.
- Total incapacity - this means your health will prevent you from returning to any gainful occupation permanently.
As you can see, both require a permanent impact on your capacity to work either in part, or in full.
Applying while in employment:
Where you remain in employment with the company to which the pension scheme relates to, and subject to other minimum criteria, you may be entitled to a top-up payment to increase the value of your pension account to address part or all of the potential impact of your ill health preventing you from continuing to work. This will be guided by the medical evidence, and is at the discretion of the pension trustees.
Applying after leaving:
You may be able to make an application for your deferred benefits to be released to you early due to ill health after leaving your employment. This is at the discretion of the pension trustees and will take account of any further employment you may have had after leaving the employer's scheme to which you're applying. You will not be entitled to any additional top-up to your pension account to address the impact of being unable to work.