H.M. TREASURY NEWS RELEASE

HM Treasury News Release

130/99

5 August 1999

MILBURN ANNOUNCES REVIEW OF ILL HEALTH RETIREMENTS

Annual cost of new medical retirements now estimated at £1 billion

The Chief Secretary to the Treasury, Alan Milburn MP, announced today a wide ranging review into the level of ill health retirement in the public sector.

About 25,000 staff working in the public sector retire on ill health grounds each year with an average extra cost to pension funds in excess of £35,000. It is estimated that the annual cost of each year's new ill health retirements is now over £1 billion.

Ill health retirements hit a peak in the mid-1990s and are much greater than in previous decade.

For example the rate of ill-health retirements among NHS male administrators in their 30s and 40s rose fourfold between 1969 and 1994, before dropping off in the late 1990s.

Ministers are particularly concerned about the wide variations in the incidence of ill health retirement between different parts of the public sector and between different employers within the public sector:

in the five years to 1996/7 the annual average of medical retirements as a percentage of all retirements ranged from 6 per cent in the armed forces to 73 per cent in the fire service. 22 per cent of civil servants retired on ill health grounds, 25 per cent of teachers, 33 per cent of NHS employees, 39 per cent of local government staff and 49 per cent in the police service;

the Audit Commission has found that in some local authorities over 50 per cent of retirements are on ill health grounds, but in a few authorities the rate is less than 10 per cent;

70 per cent of firefighters retire early for medical reasons, although in some brigades the rate is less than 50 per cent;

the rates of ill health retirement for individual police forces vary between over 60 per cent and less than 20 per cent.

The Review, among other issues, will look at the causes of ill-health retirements, including stress, and how to manage these better.

Speaking today Alan Milburn said:

"We need to find out why these levels vary so much and ensure ill health retirements are used appropriately.

"The review will look in particular at how better pension scheme and staff management can help avoid the need for ill health retirement in the first place.

"It will help employees by ensuring that employers adopt best practice to maintain their well being and their earning capacity.

"And it will help employers by helping ensure that the services of experienced staff are retained to provide the best standards of service to the public."

"People working in the public sector have a right to retire on ill health grounds when there are good reasons for it."

"In those circumstances it is vital that retiring staff get the pension benefits to which they are entitled.

"But the levels of medical retirement numbers and the high costs to the taxpayer mean that a review is now necessary."

Notes to Editors

1. The Terms of Reference for the review are:

"To review the factors leading to ill-health retirement, including why its incidence is much higher in some parts of the public sector and in some employing authorities than others;

To identify best practice both in the management of pension scheme provisions and the operation of relevant human resource policies; and

To make recommendations to Ministers on the implementation of measures to spread best practice and to ensure the appropriate use of ill health retirement benefits."

2. The work of the review will be overseen by an Inter-Departmental Group of officials chaired by the Treasury, and supported by Treasury and Cabinet Office officials.

3. The Group will also include representatives from a range of Departments, and from TUC and CBI. The Association of Local Authority Medical Advisers, the Institute of Personel Development, and the National Association of Pension Funds have also been invited to provide representatives.

4. Officials have been asked to report to the Chief Secretary with conclusions and recommendations by early 2000.