Ill health retirement – LGPS employer must pay £1,000 compensation

Mrs Hudspith was employed by Sunderland City Council and was a member of the LGPS. She suffered an injury to her shoulder and went on long term sick leave in January 2009. She then applied for ill health retirement.

Where an LGPS employer dismisses someone on the grounds of ill health and that ill health means that:

• The employee is permanently incapable of efficiently discharging the duties of their current employment; and
• They have a reduced likelihood of being capable of undertaking any gainful employment before normal retirement age.

There is a 3 tier system of benefits depending on whether and when the employee is likely to obtain gainful employment.

Before making a decision on ill health retirement, the employer is required to obtain an opinion from an IRMP about whether the employee meets the criteria for ill health retirement. In this case Dr Wong decided that Mrs Hudspith was not permanently incapable as further adjustments might allow a return to work in some capacity. The Council pointed out that the medication taken by Mrs Hudspith made it unsafe for her to drive and that she was required to take this medication for life. Driving was part of her job and they therefore asked that Dr Wong reconsider his decision. Dr Wong reached the same conclusion and the Council informed Mrs Hudspith of his opinion.

Mrs Hudspith then appealed under the internal dispute resolution procedure (IDRP). At stage 1 the decision maker decided that the Council had followed the correct procedures. At stage 2 the pension fund administering authority recommended that she make a new application for ill health retirement on the basis that she had obtained new evidence from her orthopaedic consultant confirming that there was no realistic expectation that her condition would improve with further treatment.

On the fresh application, Dr Goldsmith gave his opinion that Mrs Hudspith qualified for tier 3 benefits. Mrs Hudspith again appealed on the basis that she should have been granted enhanced benefits under tier 1 or 2.  At stage 1 of the IDRP the decision was that the Council should reconsider on the basis that Dr Goldsmith had not given any reasons for her conclusions. A further IMRP, Dr Wynn, confirmed that only tier 3 benefits were payable.  Mrs Hudspith’s stage 2 appeal was ruled out of time.

Mrs Hudspith then made a new appeal under the IDRP. The appeal was upheld on the basis that the Council had not reached a decision. Another IRMP, Dr Obishai, concluded that tier 3 benefits were payable but later revised this to tier 2 benefits. At IDRP stage 2 the administering authority decided that the Council had again failed to reach its own decision but took no further action because it believed that tier 2 benefits had been awarded.

Mrs Hudspith complained to the Pensions Ombudsman that the Council should have awarded enhanced tier 1 or tier 2 benefits from the date of her dismissal.

The Deputy Pensions Ombudsman upheld Mrs Hudspith’s complaint on the following grounds:

• It was the responsibility of the Council to decide whether Mrs Hudspith met the criteria and not the responsibility of the IRMP;
• The Council could not simply rubber stamp the IRMP’s conclusions without giving any reasons why it had reached the same conclusion;
• The Council had failed to ask the IRMP the right questions.

The Deputy Pensions Ombudsman also commented that she was surprised that the administering authority did not make its own decision at stage 2 of the IDRP given that no decision had been reached by the Council.

The Deputy Pensions Ombudsman ordered the Council to decide whether Mrs Hudspith qualified for tier 1 or tier 2 benefits at the point that her employment ended in March 2010. The Council was ordered to obtain a certificate from a new IRMP and if it decided to award enhanced benefits it must make back payments with interest. The Council was also ordered to pay Mrs Hudspith £1,000 as compensation for the distress and inconvenience caused by the Council’s maladministration.

This decision highlights the need for LGPS employers to make their own decision on ill health retirement applications and to give reasons for that decision. This means that the employer will need to ensure that the IRMP is asked the appropriate questions and gives replies in sufficient detail to enable the employer to reach their own conclusions about whether the criteria for ill health retirement are satisfied. Where the opinion is insufficiently detailed, it may be necessary to ask fuller questions in order to clarify the opinion.

The decision is also notable for the high level of compensation awarded. Back in 1999 the High Court had said that awards for distress should not exceed £1,000 in the absence of exceptional circumstances. Whilst the failings of the Council over a period of 3 years will undoubtedly have contributed to the high level of the award, it may also reflect the fact that inflation over the last 15 years may mean that a higher limit is now appropriate.

If you would like further information about ill health retirement, internal dispute resolution procedures or the Local Government Pension Scheme more generally, please contact Doug Mullen on 0121 212 7432 or douglas.mullen@anthonycollins.com.

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