Protection against starting pension payments early due to ill health retirement
An insurance policy that’s designed to help companies de-risk, budget and plan ahead for the unpredictable liability of early retirement payments under their pension schemes.
A lump sum payment is made to the trustees of the pension scheme for each valid claim. The pension scheme trustees arrange for the ill health pension payments to be made to the pension scheme member.
|Minimum policy size||
From 100 employees.
|Maximum policy size||
The full cost or partial cost to the pension scheme as a result of an employee retiring early due to ill health can be covered. This is referred to as the strain cost.
Employees can be grouped into separate categories and there can be different benefit basis between categories.
Active members of the pension scheme.
Employees must be included in the scheme as soon as they are eligible.
Cover for a member of the pension scheme ends when a payment has been made following a valid claim.
£4.5 million or the strain cost to the pension scheme if that is lower.
This is the maximum amount of cover we can provide before we ask for medical underwriting.
The free limit depends on the number of employees and the amount of cover. The amount will be shown in the quote.
For policies with less than 1,000 employees we will apply a pre-existing condition exclusion for cover up to the free limit.
This means we won’t pay benefit in relation to an employee whose permanent incapacity results from an injury or illness they were suffering from either at the date they were covered by the policy or were diagnosed with or displaying symptoms of within the two years before their cover began.
|Benefit end date||
Usually the normal pension scheme age under the pension scheme rules.
Alternatively, it can be age 65 or the state pension age.
|Cover during temporary absence||
If an employee is absent due to illness or injury, we’ll continue to cover them up to the date they’re eligible to receive an ill health early retirement pension or the benefit end date.
If an employee is absent for another reason, such as a sabbatical, we’ll continue cover for one year.
|Cover for overseas employees||
Considered on an individual basis with advance notice.
|Claims history discount||
We consider past claims history when working out the unit rate. A good claims history usually means the premiums will be lower than for a bad claims history.
Employer to complete internal assessment
Employers should complete their usual human resources procedures to determine whether the employee qualifies for early retirement according to the rules of the pension scheme. Employers need to send us the employee’s completed medical consent form as this enables for medical evidence to be shared with us and where necessary, request further information.
Submit claim within 90 days of decision
Employer and employee need to complete a claim notification form (1.1mb pdf) and send it to us within 90 days of the decision to retire the employee due to ill health.
We’ll assess whether the claim is valid under the policy terms and give the employer a decision within 5 working days of receipt of all necessary information. We may need to ask for additional information or clarity on the details received.
We’ll pay the benefit if:
- the employee qualifies for and takes ill health early retirement under the rules of the pension scheme; and
- after assessing all the medical evidence, the employee meets the definition of permanent incapacity under the policy.
Eligible claims paid within 5 working days
We aim to pay benefits within a further 5 working days of receiving all required information. The agreed amount will be paid to the pension scheme trustees. Whilst the amount is unlikely to exactly match the actual fund strain at the time of claim, it is designed to significantly reduce the employer’s liability.
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