Mr Y complained to the Pensions Ombudsman that his employer's refusal of an ill-health early retirement pension was maladministration.

The pension scheme had two levels of ill-health early retirement pension – partial incapacity (if the ill-health prevented the employee from carrying on normal employment or any other job he could be required to do for the employer) and total incapacity – ill-health which "permanently and totally destroys the member's earning capacity". The employer's decision on eligibility was final.

Mr Y suffered from neuropathy (the after-effects of cancer treatment) and requested ill-health early retirement. Mr Y's consultant reported that his chances of recovery were very slim and made it very difficult to do any form of occupation. The employer consulted its occupational health physician, who concluded that Mr Y only met the criteria for partial incapacity, and refused the total incapacity pension.

The Ombudsman upheld Mr Y's complaint and directed the employer to make the decision again. The employer had made a number of errors in coming to their decision:

  • They had relied on OH physician's report that there were various potential work avenues, despite the fact that the report had said that these had not been explored in any detail because they were outside the doctor's remit.
  • The reports from the employee's medical team were criticised on the basis that they were not aware of the precise definitions in the scheme rules, without checking whether this was the case. In fact, it was apparent that the employer and their own advisers had interpreted the criteria for total incapacity in different ways.
  • The employer had relied on evidence of treatable psychological problems from another doctor who was not an expert in the employee's condition and had never examined him.

This case emphasises the heavy burden on the employer in the situation where it is the sole decision-maker on an application for an ill-health pension. It is crucial to ensure that the medical advisers apply the exact eligibility rules and to consider the medical evidence obtained by advisers rather than simply rely on their recommendations – any uncertainties or conflicts must be followed up. The employer can prefer one of two conflicting reports, even if it is their own adviser, but must have good reasons.