A recent Pensions Ombudsman decision upholding a member complaint in an ill-health early retirement case shows that a member may be able to apply retrospectively for ill-health early retirement from active status some considerable time after his/her active membership has ceased. The case also indicates that in ill-health cases the Ombudsman may be sympathetic to requests to exercise his discretion to consider complaints outside the usual three year time limit.
The case concerned a member of the Universities Superannuation Scheme (USS). The member concerned had suffered a brain injury in November 2000. She had returned to work at the university following the injury but suffered from persistent health problems which significantly impaired her ability to do her job. In July 2007 the member resigned from her employment with the university in order to take up a new full-time job, but it appears from the Ombudsman's determination that she left her new job after a relatively short time. In May 2009 the member was granted early payment of her deferred benefits on grounds of incapacity. She subsequently asked whether she could be considered for ill-health retirement from active service back-dated to her resignation in July 2007. The member said that she was unaware at the time of the possibility of retiring early on grounds of incapacity.
The member's application for ill-health early retirement from active status back-dated to July 2007 was rejected by the scheme trustee. It said that had the member applied for early retirement in July 2007 her application would have been unsuccessful on the grounds that she did not meet the medical criteria for incapacity.
After going through the scheme's internal dispute resolution procedure, the member complained to the Ombudsman. At that point the scheme trustee claimed that the member could not have been considered to meet the requirements for retirement due to incapacity as she had left the university's employment to pursue a different career. The Ombudsman rejected the argument that this prevented the member for making a back-dated application for ill-health early retirement from active status. He noted that the scheme rules did not specifically say that retrospective applications could not be made. They were simply silent on the point. Moreover, the parties had previously proceeded on the basis that a retrospective application was possible. The original reason given by the scheme trustee for rejecting the application was not that retrospective applications were not possible, rather that the application would have been unsuccessful had it been made at the time.
The Ombudsman's office had exercised its discretion to accept the member's initial complaint for investigation despite it having been made outside the usual three year time limit for bringing claims. In view of the member's state of health, the Ombudsman said he could see no good reason to alter the initial decision to exercise discretion.
The Ombudsman further held that the university and scheme trustee had not followed the correct procedure for determining an ill-health early retirement application under the scheme rules. The wording of the USS rules required the university to determine whether the member was suffering from incapacity at the relevant time. If the university made such a determination, the rules then required the trustee to determine whether the incapacity fell within the definition of "total" or "partial" under the USS rules. This was not the procedure which the university and trustee had followed in the member's case. The Ombudsman directed them to reach a decision following the correct procedure. He also ordered them to each pay the member £500 for distress and inconvenience.
This case illustrates a number of important points. In particular, a member who is not awarded an ill-health early retirement pension at the point of leaving active membership may nevertheless be able to make a back-dated application for an ill-health early retirement pension calculated on the basis that the member has retired from active service (which in many schemes will be significantly more generous than an ill-health early retirement pension granted from deferred status). This case also shows that where a member has been suffering from ill-health, the Ombudsman may be willing to exercise his discretion to consider a complaint that has been made outside the normal three year time limit. Finally, whilst the procedure for considering an ill-health early retirement application will vary from scheme to scheme, it is always important to follow the procedure set out in the scheme rules. Failure to do this may lead to a complaint being upheld by the Pensions Ombudsman.