Court of Appeal finds member died in service rather than retirement due to outstanding holiday entitlement

In Campbell v NHS Business Services Authority [2023], the Court of Appeal dismissed an appeal that a late member had died in service rather than after retirement. It found that the Authority had not mishandled a member's application for commuted ill-health benefits.

Mrs Campbell was a member of the NHS Pension Scheme. She applied for ill-health early retirement on May 26, 2018, having been informed that she had limited life expectancy. Her employment was terminated on May 31 on the grounds of capability due to ill-health and her application for ill-health benefits was approved on June 3. She died on June 6. The Authority subsequently refused to authorise the payment of commuted ill-health benefits on the grounds that the last day of Mrs Campbell's employment, taking into account outstanding annual leave, was June 20, 2018, and therefore she had died in pensionable service.

The Pensions Ombudsman dismissed her husband's complaint concluding that Mrs Campbell's pensionable employment was to be treated, for the purposes of the Scheme rules, as having continued until the expiry of an additional period in respect of her untaken leave. As a result, she was treated as having died while still in pensionable employment and the benefits payable to her estate were death in service benefits and not commuted ill-health benefits. The High Court upheld the Ombudsman's decision.

Dismissing the appeal, the Court of Appeal held that the phrase "retires from pensionable employment" in the Scheme rules must be read and understood as a whole. The relevant retirement was retirement from pensionable employment.

As a result, Mrs Campbell's pensionable employment was treated as continuing until June 20, 2018, and pension contributions would be due in up until that date. Therefore, despite her employment having terminated as a result of ill-health on 31 May, she had not retired from pensionable employment at the time of her death.

Serious ill-health lump sum cases deal with emotive issues and trustees should be aware of the need to provide accurate information to members on how a possible extension to pensionable service under the scheme rules can affect benefits in some cases.