Legal and General and Hymans Robertson have launched a product designed to insure local government pension scheme (LGPS) providers against the potentially prohibitive costs incurred in the event of employees taking ill health early retirement.
The product has been developed in response to legislative changes to LGPS rules concerning ill health retirement which came into effect in April 2008.
The changes increased the maximum level of benefits that an ill health retiree could receive, thereby increasing the additional costs that LGPS employers had to meet in order to fund the employee’s early retirement.
The costs, which are paid to the pension fund either in an up-front lump sum or instalments, can typically exceed six figures. The new insurance, which is insured by Legal and General and available through Hymans Robertson, will offer protection against this.
John Wright, head of the public sector practice at Hymans Robertson, said: “Employers have been rightly concerned following the 2008 legislative changes. More worryingly some employers may not be aware of the risks.
“Even for large employers insurance can make sense for risk management – removing uncertainty of ill health costs.†Ill health early retirement can cause severe financial difficulties, particularly for smaller public sector employers.
“The launch of this new product will offer local government employers security, peace of mind and the confidence to budget and plan ahead without the risk of these costs.”
Diane Buckley, managing director of group protection at Legal and General, added: “A significant gap in the market has now been filled with this launch which we are sure will be welcomed by LGPS employers. Developing this product in partnership with Hymans Robertson made perfect sense given their expertise and history of working with public sector pension schemes.”
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