APPENDIX 2: LOCAL GOVERNMENT PENSION SCHEME
(AMENDMENT) REGULATIONS 2008 (SI 2008/1083)|
Further information from the Department for Communities
and Local Government
Consultation responses for the third tier of ill
Policy content and consultation responses
1. Communities and Local Government (CLG) issued
a consultation letter on 21 November 2007 for the terms of the
3rd tier to complete the ill health provision in the revised Local
Government Pensions Scheme (LGPS) which would come into force
on 1 April 2008. The letter was issued to all local authorities
in England and Wales, fire and police authorities in England and
Wales, the LGA and employer organisations, trades unions, occupational
health practitioners, local authority actuaries and treasurers.
Comments were invited by 14 January 2008. The letter follows extensive
discussions with key stakeholders including the Policy Review
2. The consultation material follows the policy
commitment by Ministers when the Local Government Pension Scheme
(Benefits, Membership and Contribution) Regulations were laid
in April 2007, to provide an ill health benefit for those who
leave their local government employment because they were permanently
incapable of their job but were medically judged capable of alternative
gainful employment shortly after leaving. The provision could
not exceed the cost envelope for the new Scheme agreed by the
Government with the employers and trade unions.
3. There were 136 responses to the consultation
letter comprising 89 local authorities, 11 other employer interests
and 31 from Trade Unions or their branches, and 5 others. 15 responses
were in overall support of the framework and 58 opposed. 39 local
authorities were concerned about increased costs and 14 local
authorities preferred a one off payment. 17 local authorities
wanted the test as 'capable of obtaining employment' rather than
the member's ability to find a job. The preferred duration of
the benefit from local authorities was 2 to 3 years and a lifetime
pension was particularly sought by the trades unions.
4. Ministers carefully considered all the responses
and an assessment of them. Against this background, the final
terms of the 3rd tier were subsequently developed with particular
attention to employers' comments regarding costs and viability
in relation to the cost envelope, and trades unions' comments
concerning fairness to scheme members and the provision of an
ill health pension.
Specific requests arising from the consultation
5. Respondents sought clarity and definition
for the terms 'quite soon after leaving employment', 'reasonable
period of time' and 'gainful employment'. These terms have been
defined in the Regulations.
6. Employers, generally, would have preferred
to retain a 2 tier system and, simply for administrative convenience,
did not like the concept of a review but they were insistent that
whatever was finally provided, its costs remain within the 0.1%
available for this tier within the 19.5% overall payroll cost
for the Scheme from April 2008. This has been achieved.
7. Employers accepted that a 3rd tier was likely
to be provided in the Local Government Pension Scheme (LGPS),
but they wanted payments to cease if gainful employment was found.
They also wanted an opportunity for a further medical opinion
at the review, and the medical test to be one of being 'capable
of gainful employment'. This has been provided.
8. Employers considered a period of 3 years would
be a 'reasonable period' to enable all treatment options to be
completed. The definition of 'reasonable period' is key to determining
the two lower levels of benefit. Employers also wanted to stop
payments at the point that an IOHP [Independent Occupational Health
Professional] confirms that the 3rd tier member is capable of
gainful employment following a review. CLG has addressed and accepted
the representations by the employers and have included these elements
in the regulations.
9. Trade Unions strongly favoured a lifelong
mandatory pension from the LGPS. A mandatory pension has been
provided for the 3rd tier but this cannot be for life as it would
not be affordable within the available cost envelope.
10. Trades Unions believe any review mechanism
should permit the member to be transferred to the enhanced 2nd
tier in justified cases and we have made provision for this event
in the regulations.
11. Trades unions specifically requested transitional
protections to deal with those cases currently being considered
and where there may have been some uncertainty as to the provisions
that applied. Transitional protections, affordable within the
agreed costs, are included in the Regulations.
12. In response to some general worries expressed
by stakeholders about the implementation of the new provisions
(which is the final element of the three tier ill health provisions),
statutory guidance is being prepared by CLG in full consultation
with the employers, trades unions and pension managers.
13. An expert Ill Health Monitoring Group has
been established to apply a continuous review of the effectiveness
and implementation of the new ill health provisions. Its formation
has been welcomed and the first meeting is scheduled for May.
Membership is drawn from key national stakeholders.
24 April 2008
Further information from the Department for Communities
and Local Government
Local Government Pension Scheme (Amendment) Regulations
15 responses to the consultation letter were in overall support
of the framework and 58 opposed. Were all the 58 respondents who
opposed the framework local authorities?
Q2: Employers would
have preferred to retain a 2 tier system and did not like the
concept of a review. Were these employers essentially the local
authorities? And do the arrangements made by HMG and described
at 6, 7 and 8 of DCLG's note mean that most or all of the 58 consultation
respondents opposed to the framework are no longer opposed, but
Q3: Paragraphs 9, 10
and 11 of DCLG's note set out TU concerns and indicate what HMG
has done in response. Have the TUs now indicated that they are
content with these proposals?
1. You have asked if all respondents who opposed
the 3rd tier framework were local authorities; if the employers
mentioned in the note were local authority employers and whether
trades unions have now indicated that they are content with the
2. We believe it is important to consider the
responses in the context of how the 3rd tier evolved in the policy
development of the entire ill health provisions for the new LGPS.
'Where next? Options for a new-look Local Government Pension Scheme
in England and Wales' published in June 2006, set out options
for tiered levels of ill health provision and the need to keep
cases under review. This was consistent with the Government's
aim of retaining people in the workforce up to their normal retirement
age and possibly beyond, and the introduction of a facility to
review levels of ill health retirement benefits during ill health
3. However, it became apparent in discussions
with stakeholders following that consultation exercise that trades
unions were looking for an additional tier of provision, probably
outside the LGPS regulations, as they did not, and still do not,
agree to the test requiring the member to be permanently incapable
of their current local authority employment. They continue to
press for an 'Income Replacement Scheme' for those who are considered
incapable of doing their current job, but who are not considered
permanently incapable under the current definition. The Ill Health
Monitoring Group will provide a forum to investigate this further.
4. Employers chose not to support a review mechanism
fearing it to be administratively resource intensive. This stance,
however, risked threatening the tight cost constraints set by
Ministers and the Local Government Association.
5. It is for these reasons that the consultation
letter received a measure of opposition from key stakeholders.
6. In answer to your specific questions, out
of the 410 local authorities who received the consultation letter,
48 responded opposing in principle or with provisos. This is less
than 12% of all authorities. Trades unions and some educational
establishments were opposed to particular aspects of the proposals,
as our previous note explained.
7. The 'employers' referred to in the previous
note are the local authorities and their representative body,
LGE. CLG has addressed key employer concerns to ensure that costs
remain within the available cost envelope. The LGA and employers
have, generally, welcomed this.
8. Trades unions have welcomed the mandatory
pension provision within the LGPS but, as mentioned above, still
have concerns that a member has to be permanently incapable of
their local government employment and have a reduced likelihood
of obtaining gainful employment, before ill health retirement
benefits are released.
6 May 2008
Memorandum by UNISON
Ill Health Retirement
1. Regulation 13 of the Amendment Regulations
amend Regulation 20 Early Leavers; Ill Health of the Local Government
Pension Scheme (Benefits, Membership and Contributions) 2007 SI
No.1166 ('the Benefit Regulations').
2. Regulation 18 amends Regulation 31 Early Payment
of Pension: Ill Health, of the Benefit Regulations.
3. The intention was that from 1 April 2008 there
would be three different benefit levels for those who qualify
for ill health retirement. The Benefit Regulations set out the
first two which are payable for life.
4. No reasonable prospect of obtaining gainful
employment before normal retirement age (65). Service increased
by 100% of potential service to normal retirement age.
5. Cannot obtain gainful employment obtain gainful
employment within a reasonable time of leaving but likely to obtain
gainful employment before normal retirement age. Service increased
by 25% of potential service to normal retirement age.
6. Level 3 was for those who could get gainful
employment within a reasonable time of leaving and the intention
was they would get a pension based on the benefits they had earned
to date of leaving without any service enhancement. The CLG eventually
decided this tier would be in the scheme. There was a consultation
and then a delay in laying the Regulations. Level 3 was finally
set out in the Amendment Regulations laid before Parliament on
16 April 2008 and coming into force on 7 May 2008.
Key concerns with the Amendment Regulations on Ill
Regulations as they stand are "unworkable"
7. For anyone to be eligible for ill health retirement
they must be permanently incapable of discharging efficiently
the duties of their current employment due to ill health. This
part of the definition has not changed from the old scheme. There
is now an additional requirement before anyone can get ill health
retirement. The member must 'have a reduced likelihood to obtaining
any gainful employment before their normal retirement age'. Under
the Regulations an Independent Occupational Health Practitioner
(IHOP) must decide whether the member falls within the definition.
The wording could be interpreted in at least 2 alternative ways.
8. It could either mean that because the member
is permanently incapable of their own job they have a reduced
likelihood of obtaining gainful employment or it could mean that
regardless of whether the member is permanently incapable of doing
their job they could do some totally different job and therefore
not qualify for any benefit at all.
9. Gainful employment is defined as paid employment
for not less than 30 hours in each week for a period of not less
than 12 months. To date there is no clear or indeed agreed definition
of what constitutes paid employment.
10. It is difficult to see how an IHOP can make
any decision under the Regulations as they stand. A lot of factors
are non medical for example geographical location and when treatment
is likely to be available.
11. The same would apply to early payment of
a pension for somebody who has already left service on ill health
grounds. The IHOP would have to determine whether the member was
capable of any gainful employment and if not whether the member
would be capable of gainful employment within 3 years of an unspecified
A key amendment to the Regulations was not consulted
on prior to the Regulations being laid
12. The Amendment Regulations sets out how members
will qualify for level 3 ill health retirement and how their benefits
will be paid. Its intention was that somebody who qualified for
ill health retirement but who could get gainful employment within
a reasonable period of leaving service would get a lower level
13. Just before the Regulations were laid and
well after the period of official consultation had ended CLG decided
that the reasonable period would be 3 years and that without any
further consultation decided that in any event the benefit would
stop after 3 years regardless of whether the member was able to
seek gainful employment or not.
The Amendment Regulations are wrong in principle
14. Anyone judged as being able to do any gainful
employment at the point of ill health retirement may not get any
benefit at all and if they are regarded as being able to do any
gainful employment within 3 years they will be put into level
3. Their pension will be reviewed after 18 months and in any event
stopped after 3 years.
15. The amendment regulation gives the employer
apparently unlimited powers to make enquiries of the member and
forces a review after 18 months. The option to review after that
date is only discretionary and there is no automatic requirement
to move the member to a higher level if they are still unable
to do gainful employment when the level 3 pension stops.
16. This goes far beyond the original policy
intention of simply targeting benefits at the most ill. It will
have penal effect on those whose jobs prospects collapse after
they have to leave work on the grounds of permanent ill health
and provide no safety net for those where the original decision
that they can do any gainful employment within 3 years proves
to be wrong.
17. It is out of step with other Public Service
Schemes. The Teachers Pension Scheme and the NHS Pension Scheme
will pay a pension to those who are permanently incapable of doing
their job when they leave for ill health reasons only the eligibility
for the upper level being linked to ability to undertake gainful
18. As the Regulations stand they do not provide
adequate transitional protection for those going through ill health
retirement at the present time. It was agreed that the benefits
of those who retire before the 1 October would be the better of
the old scheme or the new scheme basis. Clearly, as they now have
to satisfy the amended definition for ill health retirement the
transitional protection is we believe far more limited than intended.
19. It is potentially seriously detrimental to
those who were contributing to the old scheme as at 1 April. Protection
only applies to those who are 45 and over and again only those
who qualify for the amended definition of ill health retirement
and are unfit for any gainful employment for at least 3 years
Response by the Department for Communities and
Local Government Pension Scheme (Amendment) Regulations
1. You have sent Communities and Local Government
(CLG) a copy of a paper sent to the House of Lords Merits Committee
2. You have invited CLG to respond to the points
raised and, in particular, to Unison's contention that:
- the regulations as they stand are unworkable;
- a key element was not consulted on prior to the
regulations being laid; and
- the regulations are wrong in principle.
3. We believe Unison's comments do not reflect
that Unison were involved in the extensive discussions and consultations,
ongoing since before 2006, that led to the new three tiered ill
health provisions in the new look LGPS. A mandatory pension that
Unison wanted for its members has been provided.
4. Unison consider the test '
likelihood to obtaining gainful employment before their normal
retirement age' [sic] to be unworkable and could be misconstrued.
To qualify for one of the three tiered benefits, there is a dual
condition, i.e., permanent incapacity to perform a local government
employment and a reduced likelihood of obtaining gainful employment
. We are of the view that an Independent Occupational Health Practitioner
(IOHP) would not consider the second test if the first test is
not satisfied. If the member has not left their local government
employment on the grounds of permanent ill health, then any question
about their capacity to undertake gainful employment falls.
5. We do not see that the use of the words 'paid
employment' in Regulation 20 (14) are unclear but consider that
they have a normal and everyday meaning.
6. We believe that the regulations make it clear
that it is the medical question that the IOHP is being asked to
judge, not employment factors in a geographical region, and this
was a matter that medical practitioners were in clear agreement
7. Unison are of the opinion that the term 'within
three years' in the regulations was added well after the consultation
period. The Consultation period closed on 14 January 2008, but
as early as 3 March, informal guidance on ill health retirements
in the new look scheme was published by CLG saying that based
on the consultation responses, the balance of the argument was
in favour of defining the term reasonable period as a set period
of time and this was confirmed, subject to Ministers agreement,
as three years when Pension Changes was published on 14 March.
We consider that there has been a proper assessment of all the
consultation responses and this permitted balanced judgements
by early March.
7. We also took account of legal advice which
said that it would not be appropriate to leave this definition
to statutory guidance. Consultation representations confirmed
that the definition of three years was the right period to permit
all treatment options to be considered. Having defined 'within'
or 'not within' three years, it followed that the period of payment
of the 3rd tier benefit should be consistent with the duration
of the reasonable period i.e. three years.
8. There is no intention for continuous review
of a 3rd tier member and Regulation 20(6)(a) and (b) need to be
9. Unison incorrectly believe that the opportunity
to revise the 3rd tier of ill health is a discretion. The purpose
of para 11(a) is to provide for an uplift from 3rd tier to 2nd
tier at the review and the term 'may' is a permissive term. If
the condition justifies an uplift, the employer may make a Regulation
20 (3) determination.
10. When the government accepted the recommendations
made in HM-Treasury's report "Ill-Health Retirement in the
Public Sector" published in 2000, public service pension
schemes were permitted to comply with those recommendations within
a general framework allowing local variation to reflect the different
occupational and employment characteristics of each scheme. It
is not surprising, therefore, that there is some variation in
the provisions on ill-health retirement that public sector schemes
have developed when implementing the 2000 report.
11. Transitional protections have been included
as we accepted that because the 3rd tier was not in place before
1 April 2008, there could have been some uncertainty about which
provision applied for those cases currently being considered.
Employers need to make determinations under the new look scheme
because the 1st and 2nd tiers, to take effect from April 2008,
and had been on the statute book since April 2007. But in the
transitional period, the employer should assess benefits under
both the Benefits Regulations as amended and the 1997 Regulations,
and the greater of the two should be awarded.
12. The Regulations are not wrong in principle.
The complete set of ill health provisions will provide improved
and better targeted benefits for those most in need of financial
support at a time when they are incapable of performing their
current job and have no, or a reduced, prospect of future employment
before their normal retirement age. The new regime also recognises
that those leaving employment because they cannot undertake their
current local authority job but can do other work within a reasonable
period, do need some financial support while seeking alternative
9 May 2008