Pensions disputes: Ombudsman clarifies ill health benefit complaints approach

Common complaints that the ombudsman deals with include decisions not to pay a member an ill-health pension; members receiving the wrong type or amount of ill health pension; and members claiming their application for an ill health pension did not go through the correct process. The PO has published a fact sheet (3-page / 160KB PDF) to help pension schemes and employers understand what they need to do if they receive a complaint about ill health pensions.

Reviewing how decisions are reached

Dismissing a recent complaint brought by a Mrs N (14-page / 2.80MB PDF), the PO clearly set out his role in complaints about ill health early retirement decisions made by schemes. His role is to “review the way that decision was reached, that is, whether the decision maker has obtained appropriate evidence on which to base a decision; whether the relevant regulations have been applied correctly; and whether the decision is supported by the available evidence”.

The PO also stated that all relevant information must be considered, but the weight attached to the evidence is for the scheme itself to determine. The decision to give little or no weight to a particular piece of evidence is not the same as failing to consider it.

Mrs N suffered from an auto immune disease and poor mental health. After a year of sickness absence, aged 47, she applied for an ill health early retirement pension from the employer scheme. The scheme offered a ‘tier 1’ benefit to members who are unable to perform their current role due to permanent ill health, or a more generous ‘tier 2’ benefit to members who are unable to carry out any employment due to permanent ill health.

Mrs N’s first application was denied after the scheme’s medical adviser concluded that there was insufficient evidence about whether her incapacity was likely to be permanent. She was awarded a tier 1 pension on appeal to the scheme’s internal dispute resolution process, because the medical adviser concluded that while she would be permanently incapable of performing her previous role, she was not permanently incapable of any regular employment. The adviser held the view that, on the balance of probabilities, Mrs N would be able to perform an administrative job with further treatments.

Mrs N believed she was entitled to a tier 2 pension, and pursued her claim internally before going to the PO. She has now been unable to work for five years and believes she will be unable to return to any full-time employment.

The PO did not uphold her complaint. He found that the scheme considered all the relevant medical evidence correctly, and abided by the relevant regulations. Notably, no specialist had confirmed that Mrs N met the criteria for tier 2 ill-health early retirement at the time she left employment.

When arriving at his determination, the PO was required to assess the scheme’s decision at the time it was made. Mrs N believes that there is now evidence that her capacity for work will not improve, and that a delay to some of her treatment looks to have caused permanent damage. However, the PO is not permitted to apply the benefit of hindsight. He could only assess the scheme’s decision by reference to the medical evidence which either was available or could have been available at the time of the assessment.

Approach to medical evidence

The PO upheld a second complaint, brought by a Ms G (25-page / 1.36MB PDF), on the ground that her ill-health early retirement application was not considered properly by her employer. Ms G was awarded £1,000 for serious distress and inconvenience, plus £500 for the additional distress and inconvenience which she suffered because the employer failed to consider her complaint under its internal dispute resolution process in a timely fashion. The employer must now reconsider her complaint.

Ms G’s employment was terminated for incapability due to ill-health. The employer did not consider her eligibility for ill-health early retirement as an active pension scheme member before terminating her employment. Ms G made her own application, and an initial medical report recommended that she would be likely to quality for ill-health early retirement on the grounds of chronic ill-health.

The report had assessed Ms G’s health at the wrong date, so the employer requested a new medical report. This second report did not conclude that Ms G was permanently incapacitated, and the employer declined her ill-health pension application. Ms G complained under the employer’s internal dispute resolution procedure and then, following delays, to the PO.

The PO found that the employer had been entitled to review Ms G’s application after it identified the flaw in the first medical report, and that its actions were “genuine and necessary attempts to rectify errors which had occurred during the decision-making process … intended to ensure that [it] made its decision on the correct basis”. Although a PO adjudicator found evidence of the employer’s concerns about the costs of providing Ms G with an ill-health pension, the PO rejected her claim that the employer’s actions were simply “a means to avoid liability” for these costs.

However, the PO went on to conclude that the employer had not properly considered Ms G’s application. In the PO’s view, the employer should have queried some of the second medical adviser’s reasoning, particularly on the likely efficacy of further treatments.

The PO’s determination includes helpful explanation of how scheme decision makers should approach medical evidence in these cases. They should seek further clarification where there is insufficient information or any uncertainty and, where there is conflicting medical evidence, be clear that all the evidence has been considered and why one interpretation has been given more weight than the other.

In this case, the adjudicator decided there was some merit in Ms G’s claim that the second medical adviser had formed his opinion without properly understanding her condition and the history of her medical treatment. The PO agreed Ms G’s application was not considered properly and should be reviewed.