PSI10.2.3 - Retirement before Normal Retirement Date: Incapacity Retirement - Meaning Of Incapacity

(This archived guidance relates to HMRC discretionary practice before the 6th April 2006. For current guidance on Registered Pension Schemes see the Registered Pension Schemes Manual)

[PN Glossary]

The Practice Notes define incapacity as “physical or mental deterioration which is sufficiently serious to prevent the individual from following his or her normal employment, or which seriously impairs his or her earning capacity”. It is for the scheme administrator to decide whether a member’s condition brings him or her within this description; we do not normally become involved. [However, in the case of a controlling director, the Retirement Benefits Schemes (Information Powers) Regulations [1995] require any proposal to pay benefits on retirement on incapacity grounds, to be referred to this Office not less than 28 days prior to such payment]. PN Glossary makes it clear that a decline in energy or ability is not sufficient justification for incapacity retirement.

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