NHS Ill-Health Dismissal: Pay, Pension and Your Rights

This guide is for NHS staff who are off sick long term, are facing a capability or final review meeting, or have been dismissed because of their health, and want to know what happens to their pay and pension. It links to and checks against our ill-health retirement explainer, which describes the two tiers in general terms. FrontlinePay is independent. This is general information, not medical, legal or financial advice: your union rep, occupational health, NHS Pensions and, where needed, an employment solicitor are the people who can advise on your case.

Two different decisions

NHS Pensions is clear that they rely on different criteria. If your employer has decided to terminate your employment, that does not automatically lead to payment of ill-health retirement benefits, and being on incapacity or disability benefits does not mean you will automatically receive them either. It also works the other way: you can be awarded ill-health retirement without having been dismissed, because permanent ill health must be a reason for you leaving work, not necessarily the employer's termination. For the general picture see NHS ill-health retirement explained.

How a health capability dismissal should work

GOV.UK lists a long-term illness that makes it impossible to do your job as a fair reason for dismissal, but says the employer should look for ways to support you, such as changing the job if it is contributing to your illness, and give you reasonable time to recover. ACAS says dismissal should be considered only after the employer has supported you and tried to help you return, that reasonable adjustments should be considered, and that all other options should have been looked at first. The NHS Handbook (England) adds specific expectations in Annex 26, the sickness absence framework:

These steps are expectations in the Handbook's framework, not a guarantee of how every trust runs them. If a step was skipped, for example no occupational health report or no consideration of redeployment, that is worth raising with your rep. Our guide to the NHS capability procedure describes the wider process.

Notice and contractual sick pay

• ✓ Notice. Annex 26 says contractual notice must be given when a contract is ended on grounds of ill health. The statutory minimum, according to GOV.UK, is at least one week after one month's service, one week for each year of service from two years, up to 12 weeks for 12 years or more. The employer may give more but not less. The Handbook (paragraph 19.2) leaves notice periods that differ from the statutory minimum to local agreement, so check your contract.
• ✓ Sick pay ends on your last day. Handbook paragraph 14.3 (England) says that when employment ends, sick pay entitlement ceases from the last day of employment. You do not keep any remaining half pay after that.
• ✓ Termination before sick pay runs out is allowed in limited cases. Paragraph 14.18 allows an employer, after investigation, consultation and consideration of other alternative posts, and where there is no reasonable prospect of returning, to end employment before the end of the paid sick period, subject to its agreed policies.
• ✓ Reinstated half pay. Paragraphs 14.10 to 14.12 say half pay can be reinstated after 12 months of continuous absence if a final review has not happened, but only where the delay is the employer's, and until the final review takes place.
• ✓ Discretion to extend. Paragraph 14.13 lets employers extend sick pay beyond the scale where a return to work in the short term is expected and an extension would materially support it, or in any other circumstance the employer thinks reasonable.

Use the sick pay runway calculator to see when full and half pay end, and what happens when NHS sick pay runs out for the stages. If your illness or injury is work-related, ask about injury allowance: NHS injury allowance explained and the injury allowance checker. Check your final pay, including untaken annual leave, with the leaver final pay checker.

What money you can expect

People searching for 'ill health dismissal compensation' or 'payment' usually want one number. There is not one. The money comes from separate sources:

Unlike redundancy, a dismissal on health grounds does not carry a statutory or Handbook redundancy-style payment. We found no separate Handbook compensation payment for it. The statutory redundancy and Section 16 rules apply to redundancy, not to capability, so see NHS redundancy pay explained only if your employer says your post is being deleted.

The NHS Pension tiers, checked against NHS Pensions

NHS Pensions' member ill-health guide sets out the rules. Our explainer describes the tiers in general terms and agrees with the guide on the main points. The specifics:

• ✓ Eligibility. At least two years' membership, not yet at Normal Pension Age, too ill to work in your present job, and permanent ill health must be one of the reasons you leave work.
• ✓ 'Permanently' means until Normal Pension Age: 60 in the 1995 Section, 65 in the 2008 Section, and State Pension age (or 65 if later) in the 2015 Scheme.
• ✓ Who decides. NHS Pensions' medical advisers, independently, on all the medical evidence. They can ask for more evidence. This is not an employer decision.
• ✓ Tier 1 with reassessment. If the advisers cannot be sure about Tier 2, they may award Tier 1 and say you can ask for reassessment within three years, in writing, with new medical evidence about the same condition.
• ✓ Serious ill health. If you are terminally ill with a life expectancy under 12 months, benefits are calculated as Tier 2 and you may be able to take a lump sum instead.
• ✓ Pension increases. Ill-health pensions rise each April in line with CPI.

Our explainer says the lower tier is for people who could reasonably work in some other capacity and the higher tier is for people unable to do any regular employment, with a substantially larger enhancement. That matches. The explainer does not give the two-year membership test or the size of the enhancement, which are above. If you are not awarded ill-health retirement, your benefits stay in the Scheme as a deferred pension if you have two or more years' qualifying membership, payable from Normal Pension Age, or earlier from minimum pension age with a reduction. See deferred benefits explained and the retirement age checker. Under two years, you may be able to get a refund of your own contributions. See also NHS Pension and long-term sickness.

Applying, and the timing

• ✓ If you are still employed: ask HR or the pensions department for form AW33E. Your employer completes Part A, you complete Part B and your occupational health doctor completes Part C. If occupational health cannot, your GP or a specialist can.
• ✓ If you have left: deferred members apply on form AW240, with part of it completed by the doctor treating you. You will not have access to occupational health, and you are responsible for any fee for medical evidence.
• ✓ Ask early. Annex 26 says occupational health advice on a successful application should be sought before a decision to terminate. If it was not, raise it with your rep. Incomplete forms can be returned, which delays the application.
• ✓ After a decision, you complete a claim form (AW8, or AW8P for deferred members) to get paid.
• ✓ Disputes. NHS Pensions' guide describes a DRP1 form to dispute a Tier 1 decision. For other disputes see the NHS Pension disputes process explained and ask NHS Pensions about time limits.

NHS Pensions' guide does not state a time limit for applying and does not say whether dismissal itself affects eligibility, so the safe course is to raise it before your employment ends and to ask NHS Pensions in writing how your case would be treated.

Fairness, discrimination and tribunal claims

A dismissal can be fair or unfair whatever the pension outcome. GOV.UK says that if your illness counts as a disability your employer has a legal duty to support you at work, and dismissing you because of it may be unlawful discrimination. ACAS says dismissing a disabled employee, including someone with a long-term health condition, could amount to discrimination, and that you can bring a claim if you believe you were unfairly dismissed. Discrimination claims need no minimum service. Ordinary unfair dismissal needs two years' continuous service for dismissals before 1 January 2027. From 1 January 2027, GOV.UK says the qualifying period falls to six months, and the cap on compensatory awards is due to be removed. Those changes are not in force yet.

The time limit is short. For most claims where the dismissal is on or after 1 October 2026, you must contact Acas within 6 months less a day of your effective date of termination, and within 3 months less a day for earlier dismissals. Use the tribunal time limit calculator, then read unfair versus constructive dismissal.

Appeal

ACAS says an employee can appeal a dismissal and that the employer should tell them of the right to appeal when dismissing them. Check your dismissal letter for the deadline, which is often short. An appeal does not extend the tribunal time limit, so you may need to do both in parallel. Our guide on how to appeal an NHS dismissal covers grounds, the letter and the hearing, and what an NHS dismissal letter must say covers the dates to look for. The broader picture is in dismissed from the NHS: what happens next.

What to do now

• ✓ Ask HR for your trust's sickness absence and capability policies, and your sick pay position
• ✓ Ask occupational health for a report that covers your prospects, adjustments, redeployment and ill-health retirement
• ✓ Ask your pensions officer about an ill-health retirement application before any decision to terminate
• ✓ Contact your union rep now and ask to be accompanied at any review or final review
• ✓ Note every date: your last day, your notice end date, the appeal deadline and your tribunal deadline
• ✓ Keep copies of fit notes, occupational health letters and every email

Related guides

This page is general information for NHS staff in England, correct to the best of our knowledge as of 19 October 2026. Wales, Scotland and Northern Ireland have their own editions of Section 14 and their own pension arrangements, so check yours. It is not medical, legal or financial advice and should not replace advice from NHS Pensions, your occupational health service, your trust's policies, your union representative or a regulated adviser. FrontlinePay is independent and not affiliated with NHS England, NHS Pensions, ACAS or any trade union.