TPO upholds ill-health early retirement complaint

The Pensions Ombudsman (TPO) has upheld a complaint against Waltham Forest College over its handling of an ill-health early-retirement (IHER) claim, and ordered it to pay £1,000 for the serious distress and inconvenience caused to the complainant.

Ms G complained that the college improperly decided to decline her application for payment of IHER benefits in the local government pension scheme (LGPS) from active member status, and that London Borough of Waltham Forest council failed to consider her complaint in a timely manner.

Ms G was terminated on the grounds of incapability due to ill-health in February 2016, after the college concluded that “it was highly unlikely that [Ms G] would be able to resume her duties at the college, even on a phased return basis, in the foreseeable future."

After an unsuccessful appeal on this decision, Ms G’s solicitor submitted a request for IHER under the LGPS to the college in August 2016.

In October 2016, the college confirmed that it had contacted the LGPS for guidance on the appropriate process to follow when considering Ms G’s IHER application, and that it would need a report from an independent registered medical practitioner (IRMP)

Following delays in finding a suitable IRMP, Ms G was examined by a Petersfield Surgery IRMP, Dr Birch, in March 2017, who concluded that Ms G was not fit for her role and was not expected to recover to the point that she will become so in the future, meaning that she is likely to qualify for early retirement on the grounds of chronic ill-health.

The report and a completed Certificate of Permanent Incapacity for active members were then sent to the Pensions Shared Service of Wandsworth Council, the administrators of the fund, along with a request for the capital cost of providing the IHER benefits available to Ms G.

On 12 May 2017, the Pensions Shared Service confirmed that the capital cost of granting Ms G a Tier One IHER pension of £14,420.59 per annum, and a lump sum of £6,523.10, was £291,174.47.

Whilst the council also confirmed in May 2017 that the college would not have to pay the entire capital cost immediately and the payment, with interest, could be spread over a three-year period starting the year following retirement, the college argued that the capital cost seemed “staggeringly high”.

On 12 June 2017, the college wrote to the Pensions Shared Service to confirm that it had decided not to take Ms G’s application any further due to financial obligations, also taking legal advice on how to deal with the application at this time.

The college subsequently discovered that Dr Birch had incorrectly provided his opinion on the state of her health at the date of the medical examination in March 2017 instead of on the date her employment ended in February 2016.

In light of this, it confirmed to Ms G in July 2017 that, as the correct process had not been followed, it was not yet in a position to make a decision on her IHER application from active status, asking Medigold health to act as a new IRMP.

Medigold Health was asked to consider Ms G’s IHER application from both active and deferred member status, with the college emphasising that Ms G had applied for IHER from active status and her state of health should therefore be assessed at the date on which her employment ended.

Based on the evidence and Ms G's GP report, IRMP, Dr Southam, stated that he would not consider Ms G permanently incapable of discharging the duties of her previous employment, including at the time of her dismissal in February 2016.

The college subsequently informed Ms G in October 2017 that she was not entitled to IHER, although she requested further clarification as to how the decision was reached, escalating the complaint under the internal dispute resolution procedure (IDRP) in April 2018.

The college did not uphold Ms G’s complaint in its stage one decision, however, explaining that it was unaware at the time that Dr Birch, had incorrectly provided his opinion on Ms G’s state of health as at the date of the medical examination in March 2017.

The complaint was then escalated to the Pensions Shared Service under stage two of the IDRP, with receipt of the complaint from the council in November 2019.

However, in January 2019, the council stated it would be unable to make a decision within the expected timescale of two months due to the complexity of the case and the amount of paperwork, confirming that it would hope to provide a decision in February 2019.

Despite this, the council notified the solicitor in April 2019 that it had still not been able to reach a decision, and in the same month, Ms G made a complaint against both the college and the council to TPO.

Whilst the council belatedly complete the stage two IDRP in May 2020, recommending that the college instruct a new IRMP to look at the case, the college stated that it was unable to take any action as the council had not provided a “clear basis or reasoning”.

After the complaint was passed to TPO, the council wrote to the ombudsman to confirm that it was willing to award Ms G £500 in recognition of the significant distress and inconvenience suffered amid the stage two IDRP delays.

In addition to this, the college’s legal adviser, Eversheds Sutherland, told TPO that, in light of the “albeit brief and significantly delayed” stage two decision, the college would be prepared to try and settle the complain on an amicable basis by re-considering her application and seeking the medical opinion of a third IRMP.

It added that, on the issue of distress and inconvenience, in the interests of trying to resolve the member’s complaint on an amicable basis, the college would be prepared to offer a goodwill gesture to the member in the amount of £500.

However, whilst the pensions ombudsman, Anthony Arter, agreed that the council's offer of £500 was appropriate, he stated that the manner in which the college handled the IHER process was "bound to have caused Ms G serious distress and inconvenience", increasing the award in respect of the college’s maladministration to £1,000.

In relation to the IHER claim itself, Arter explained that he had reviewed the way decision was reached and whether the decision makes sense based on the evidence, rather than whether or not he agrees with the decision.

A key point of consideration focused around Ms G's assertion that the college's email on 12 June 2017 revealed the college’s real reason for not awarding her an IHER pension from the LGPS as being purely on grounds of cost.

However, whilst Arter acknowledged that cost considerations should not have been taken into account by the college, he clarified that, regardless of whether the e-mail conveyed the college’s preliminary or final decision, it was entitled to review this decision by making further enquiries if it had identified any flaws in its decision making process

“Because the college discovered that Dr Birch had made a mistake in his report the college did not inform Ms G of its final decision on the grant of an ill health pension," he stated.

"I find that it acted correctly by choosing to defer making the decision until the mistake had been rectified."

Indeed, Arter also suggested that the actions taken by the college after this point were not simply a means to avoid liability, but rather “were genuine and necessary attempts to rectify errors which had occurred during the decision making process”.

However, he acknowledged that further errors were made by the college during its decision making process following the appointment of Medigold Health, concluding that Ms G’s IHER application from active member status was not considered properly.

As a result, the college has been given 28 days to review the application and nominate a new IRMP who had no involvement with the matter previously, and to reconsider the application from active status.

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