Partial incapacity mid 40s

Farmer-Giles

Hello,
I'm right on the cusp of a decision from Head Office regarding partial incapacity departure from employer...

I was diagnosed with a non-terminal but incurable illness 8 years ago which has episodic tendencies which had historically been quickly brought under control until late 2012.
Contacted HR & Occ Health in Feb 2013 regarding difficulties in maintaining illness control and (informal) flexible working arrangements were put in place. Company Doctor wouldn't approve an industry specific medical in May 2013 and by August 2013 I was on a full sick note and undergoing out-patient hospital treatment (ongoing).

Feb 2014 a phone call from HR and suggestion that they weren't obliged to pay me followed by letter to the same with suggestion of applying for ESA.
Various HR errors regarding written communication errors and statutory / discretionary sick pay calculations and inability to produce form SSP1 in a timely manner.
Rather than a tribunal / argument, I kindly pointed out their errors and have seemingly cordially moved forward to last week with joint HR / Occ Health request that Head Office initiate release on grounds of partial incapacity (on strength of Hospital Consultants report of last month and last August).

I had considered since diagnosis 8 years ago that I might not be able to continue my normal work at some point, so had paid off the mortgage and eradicated any debt, minimised outgoings and simplified savings / investments of around £20,000.

I had been aware of the risk of partial incapacity departure.
I am mid 40s with 28 years continuous service in final salary company scheme with a FTSE10 company.

My understanding is if this goes through, then I may be subject to periodic reviews by the pension trustee and had thought that partial incapacity pension from them might be around £7000 p.a.
Dug out an old pension statement (new one due 31st. March) and it would appear to be a little more than that, maybe £25,000+).

It would be a little cheeky at this stage to wonder if an option of a small lump sum occurs in such circumstances?
(My view would be to take the minimal amount of any lump sum option balanced against life expectancy).

What happens regarding National Insurance if at working age and pensioned off on health grounds?

What happens at age 55?

I presume a self-assessment form from the Tax Office would be a good idea (haven't had one for years on PAYE).

A potential fly in the ointment would be a 'reasonable' suggestion of relocating a couple of hundred miles to the nearest location able to offer a sensible job on a reduced rate.

The other alternative is an indefinite period on zero pay and £71 a week on ESA for 12 months and ATOS assesments etc. etc.

atush

How many years have you paid NIcs? Get a statement from DWP stating the number of years you have paid in.

Any benefits you get after this, means tested or not, will mean additional nics being paid if you need them so look into this. If you already have 35 years total, you won't need more for the new pension rules in 2016.

Farmer-Giles

Cheers atush:
28 years continuous working NI contributions

Trying to avoid the ESA benefits route as it is not sustainable (£71 per week entitlement) and hoping timing of a decision by employer / their pension trustee (contracted out of S2P) regarding partial incapacity is clarified before cessation of pay whist remaining fully employed but signed off.

xylophone

Re state pension https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/181237/single-tier-pension-fact-sheet.pdf

Farmer-Giles

Cheers, but at 45 and in an employers contracted out fund for the last 28 years, State pension isn't really an issue...

xylophone

Cheers, but at 45 and in an employers contracted out fund for the last 28 years, State pension isn't really an issue...

You might find the information on contracted out deduction in the link of interest- you might also wish to be aware of the NI contributions information.

Farmer-Giles

I was looking at around 1.4% of any partial incapacity pension (and any other future income) going as NI contributions, but unsure if these are deducted by pension fund trustees in a monthly payslip / PAYE style, or had to be declared and paid separately?
Are 'voluntary' NI contributions up to a qualifying age the way it is done?

xylophone

NI is not payable on pension income


https://forums.moneysavingexpert.com/discussion/3700509 This might be worth a look (remembering the upcoming 35 year change).

Farmer-Giles

HR / Occ Health have confirmed that formal application for partial incapacity is in progress for consideration under the employer's procedures and within the company scheme rules (mainly due to inability to perform normal job description and unlikely to be suitable for relocation due to permanent health condition).

Potential pension will be no less than 1/3rd of comparable normal pension calculated from age 55 (DB scheme). This will be adequate for me, although it is not clear to me (yet) if a lump sum is optional (tempted to take only a small lump sum if offered).

My understanding is that periodic reassessment of my medical condition is likely. I'm not sure if at 55 I become eligible for the full pension relative to the 29 years I worked?
I presume for National Insurance I need to make contributions up to the shortfall from 29 years to 34 years? (Or would this mean applying for ESA to cover NI, with the risk that it would only run for 12 months max and by the nature of partial incapacity being understandably in the work activity group / JSA)?
In fairness to other pension fund members, the Trustee is entitled to make periodic reassessment, but I can't find much on what happens in such circumstances, or if at some point in the future declined, you can then cycle back into receiving pension before the scheme's normal age 55 access?

Although not wishing to jump the gun before this is finalised, I am wondering what sort of things I should be planning ahead with or considering?
(I have no children, no debt, no mortgage. Potential partial incapacity pension per month is several times my monthly outgoings. I have savings and modest investment equivalent to 12 months spending, although that is now depleting for each month whilst employed on zero pay signed off long-term sick).

Farmer-Giles

I've been invited by the employer to attend a meeting next week regarding "considering notice of termination of employment on grounds of ill health"
I'm tempted to take a Union Rep along as a 'companion' - although I haven't had any figures or dealings with the company pension trust, potential pension will be no less than 1/3rd final salary p.a. (which is adequate).

Any particular questions I should be asking or things to be aware of?

Farmer-Giles

Cordial and straight forward agreement to terminate employment on grounds of ill health.
Pension figures were better than expected:
£33,500 pa
or reduced to £26,000 if maximum tax free lump sum of £173,300 is taken.
(1 to 23 commutation rate)?
Illness is incurable, but not life threatening, but may get progressively inconvenient and take about 5 years off life expectancy.
I have a modest house with no mortgage, no debt, or children or partner.
I have a small patch of wildlife friendly farm-land that is cost neutral.
I was tempted to take the max lump sum as the partial incapacity pension is subject to annual medical review (although I'm unlikely to improve from present condition).
Normal scheme retirement age is presently 55 (10 years away).
Fund is well managed (FTSE10 employer) and annual increases in line with RPI
£26k pa adequately covers my lifestyle - was tempted to put lump sum into a split of safe / medium risk investment and await first annual health review. After that, maybe move to a similar modest but more comfortable bungalow nearer my couple of acres, until I pop off or require care.
An additional indicated payment in lieu of notice of £77k is awaiting clarification on first £30k tax free or all tax free if HMRC approve ill health aspect.

As lots of folks ponder in similar threads: max pension, max lump sum or sensible split?