The Pensions Ombudsman was asked to determine a complaint which arose following a company's refusal to award ill health early retirement ("IHER") to a member of a pension scheme.

The Ombudsman found that the company's decision had been based on deficient medical opinion. He therefore directed the trustees of the pension scheme, as "the final point at which the application was refused", to re-assess the decision and substitute their own decision on the payment of benefits.

Both British Airways as the company and the trustees were also each directed to pay the member £200 for the distress and inconvenience caused by their maladministration.


Mr Jamaluddin was employed by British Airways as a pilot and was a member of the New Airways Pension Scheme.

The scheme rules provided that a member would be entitled to IHER in the following circumstances:

  • if a member's employment was terminated before normal retirement age by the employer on grounds of "medical incapacity", as notified to the Trustees; or  
  • if a pilot or officer member lost the appropriate licence for medical reasons and, in the opinion of the principal company's medical adviser, would not recover for the foreseeable future.

The trustees of the scheme had under the scheme's rules a general power of decision, including determining whether or not individuals were entitled to benefits under the scheme rules, as well as any disputes.

In October 2007 Mr Jamaluddin had his airside security pass suspended on security grounds. He was also suspended from employment at this time. Two years later Mr Jamaluddin had his air security pass permanently withdrawn on the grounds that there remained a security risk. He was told that his employment as a first officer would be terminated as a result of this decision, however, he was given until April 2010 to search for an alternative role within British Airways before that termination would be effected.

On 2 March 2010, Mr Jamaluddin was diagnosed with depression and he was unable to continue his search for an alternative role. His Joint Aviation Authorities medical certification and consequently his pilot's licence were then suspended temporarily in light of his illness.

He commenced employment tribunal proceedings against the company in April 2010. British Airways terminated Mr Jamaluddin's employment by letter, dated 30 July 2010, giving him three months' notice.

On 16 September 2010, the company wrote to Mr Jamaluddin stating that he would not be eligible for consideration for an ill health pension as the reason for terminating his employment was "withdrawal of your security pass and not medical incapacity". The company then informed the trustees that Mr Jamaluddin was leaving; the reason given was: "Resigned – other personal reasons". Accordingly, an ill health pension was not paid to him.

Mr Jamaluddin then made an application for an ill health pension under rule 14(c) of the scheme rules. This provided that a member, whose employment was terminated before normal retirement age, could make an application to the company for an immediate yearly pension on the grounds of medical incapacity.

"Medical Incapacity" was defined as incapacity from which the member was "unlikely to recover for the foreseeable future" and which "prevents the individual from carrying out his normal duties even after reasonable adjustments." British Airways had provided its medical advisers with guidance notes, which stated that "foreseeable future" meant a period of two years.

Rule 14(d) of the scheme rules stated that if the employer granted the application, it should notify the trustees accordingly.

Mr Jamaluddin supplied a medical report from a consultant psychiatrist in support of his application, which stated that there was no realistic prospect of him returning to flying duties in the foreseeable future. It also noted that his recovery would be severely compromised if British Airways were unable to resolve his employment issues to his satisfaction.

However, a British Airways Health Service doctor considered that Mr Jamaluddin would in fact be likely to recover within two years as the Employment Tribunal was set to take place the following month. British Airways relied on this advice and informed Mr Jamaluddin that he was therefore ineligible for IHER under the said rule 14(c).

Mr Jamaluddin's consultant psychiatrist provided British Airways with another report in January 2011 which added that he would be unlikely to return to flying duties within three years due to the prospect of prolonged legal proceedings. Based on this report, the Civil Aviation Authority informed Mr Jamaluddin that it did not consider that he would be able to regain valid certification and hold a pilot's licence "for the foreseeable future".


The Ombudsman upheld Mr Jamaluddin's complaint.

It was determined that, although the power to award IHER lay solely with British Airways, the trustees had a general power of decision under the scheme rules and consequently a duty to ensure that the Rules governing the company's discretion were correctly applied. It was held that the trustees' duty could extend further in this case, to determining whether the medical incapacity test had been correctly applied as the evidence relied upon by British Airways was deficient.

Rule 14(c) provided a standalone right for a member to apply for an IHER pension, but it did not explicitly provide for who was to make the decision as to whether "grounds of medical incapacity" existed.

The Ombudsman noted that in the case of a rule which is unclear and ambiguous, the balancing factor in interpretation is how best to make it work in practice and consistently with the scheme's documents. The Ombudsman found that the decision was to be made by British Airways in the first instance, but that the trustees could then review that decision if they had reason to think that medical incapacity had not been certified when it should have been or in other circumstances in which a review would be considered necessary.

The Ombudsman directed the trustees to reconsider, based on such medical evidence and advice as they may require, but without hindsight, whether on the date of his application Mr Jamaluddin met the definition of medical incapacity.


Although the rules were open to interpretation, the IHER provisions in question are relatively pro-employer and the scope for the trustees' to adjudicate on IHER applications is limited.

That the Ombudsman directed the trustees to reconsider the position on the basis of a general power begs the question as to whether this decision imposed obligations on the trustees which go beyond those expected in practice under the scheme rules.