Definition
The early termination of employment and access to pension benefits when an employee is permanently unable to continue working due to a serious health condition. Ill health retirement is governed by the rules of the employer's pension scheme.
UK Context
Ill health retirement processes vary by pension scheme. Public sector schemes (NHS, LGPS, Teachers', Civil Service) have structured IHR tiers with specific eligibility criteria. Private sector schemes are governed by their own trust deeds. HMRC allows tax-free lump sums from pension schemes on ill health retirement under specific conditions. Employment tribunals will scrutinise whether the dismissal process was fair and whether reasonable adjustments were considered.
Best Practices
- Treat ill health retirement as a last resort after exploring all alternatives including adjustments and redeployment
- Obtain an independent medical opinion from a practitioner approved by the pension scheme
- Ensure the employee is fully informed of their pension entitlements and the IHR process at each stage
- Allow the employee to appeal the decision and provide additional medical evidence
- Work closely with the pension scheme administrator to ensure compliance with scheme rules
Frequently Asked Questions
Who decides on ill health retirement?
The decision is typically made by the employer based on medical evidence from an independent registered medical practitioner. For public sector schemes, the pension administrator may make the decision based on the scheme's specific rules and medical criteria.
Can an employee request ill health retirement?
Yes. An employee can request that their employer considers them for ill health retirement. However, the employer is not obliged to grant the request — the decision depends on the medical evidence and the pension scheme rules. The employee can appeal if the request is refused.
Is ill health retirement the same as being dismissed on health grounds?
They are related but distinct. Dismissal on health grounds is an employment law process (capability dismissal). Ill health retirement is a pension benefit. An employee can be dismissed on health grounds without qualifying for IHR if they do not meet the pension scheme's medical criteria, and vice versa.