Medical Chart

The Deputy Pensions Ombudsman has held in a recent determination (Mullen PO-3356), that in situations where a pension scheme’s ill health early retirement (IHER) rule does not contain an express requirement for a condition to be permanent, it is nevertheless reasonable for trustees to imply such a requirement into the rule.  This decision is in line with previous case law* and provided a clear response to the Pensions Advisory Service, which had written to the trustees asking why a requirement for permanence had been implied.

The Deputy Ombudsman also reconfirmed the criteria to be applied by trustees when making a decision on an IHER case.

The facts of the case

Mr Mullen went on long-term sick leave with psoriatic arthritis in 2012 and applied for an IHER pension from the Heidelberg Group Pension Scheme. The incapacity test in the scheme rules had two limbs:

1. The member must be permanently unable to continue in his occupation in the opinion of a registered medical practitioner.

2. Upon receiving evidence of this, the trustees must believe the member is unable to carry on ‘any paid employment’.

The rules further provided the trustees could revisit any IHER pension if the member recovered.

Mr Mullen was referred to a doctor who reported that:

  • Mr Mullen was ‘permanently unfit for his normal duties’, but also stated
  • He (the doctor) was unable to reach a conclusion in respect of any other paid employment, as this depended on “future progress with time and/or further treatment”.

The trustees sought clarification on this second point but no further information was provided.  However, the doctor also sent a letter to the employer and one of the trustees noting that there were further treatments for Mr Mullen’s condition which he was still considering trying, but the trustees did not consider this information.  Subsequently, they rejected Mr Mullen’s application on the basis that there had been no confirmation that he would remain unfit to carry out any paid employment. Mr Mullen then complained to the Ombudsman that the trustees had incorrectly decided he should not be awarded an IHER pension.

Principles

The Deputy Ombudsman restated the well-established principles that should be adhered to by trustees when considering if a member meets the incapacity test.  Trustees should:

  • take into account all relevant, but no irrelevant factors;
  • direct themselves properly in law (in particular, they must adopt a correct construction of the scheme rules);
  • ask themselves the correct questions; and
  • they must not arrive at a decision that no reasonable decision maker who was properly directing himself could make.

Determination

The Deputy Ombudsman upheld Mr Mullen’s complaint as the trustees had failed to consider a relevant factor, namely the letter written to the employer which advised of potential treatments available.

The Deputy Ombudsman noted that the second limb of the incapacity test did not require the condition to be permanent.  However, it was reasonable for trustees to imply this requirement as not doing so might lead to a situation where a member who was only temporarily unable to carry out other paid employment would be eligible for an IHER pension.  It was also noted that the rules provided for the trustees to revisit IHER pension awards in circumstances where a member had recovered from incapacity, and where therefore permanence did not in fact turn out to be permanent.

The Deputy Ombudsman therefore referred the case back to the trustees for their further consideration and directed them to pay Mr Mullen £200 for distress and inconvenience caused by their maladministration.  Ironically, this might prove to be a pyrrhic victory for Mr Mullen, as consideration of the doctor’s letter to the employer which stated that certain treatments might alleviate Mr Mullen’s condition might make it less likely that the trustees will conclude that he passes the second limb of the incapacity test in the rules.

This post was contributed by Stuart Evans and Hannah Algrafi. For more information, email blogs@gateleyuk.com.

*Harris v Shuttleworth


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This blog is intended only as a synopsis of certain recent developments. If any matter referred to in this blog is sought to be relied upon, further advice should be obtained.