Tucked away in the UK government’s recent white paper on plans to reform the police is a little-noticed proposal to tackle the ticklish problem of early retirement.
Early retirement because of ill health in Britain’s police forces – or ‘medical retirement’ as it is known – is a huge drain on the resources of both local authorities and central government. In 1990 more than half of all police retirements were medical retirements. Since then, the percentage has fallen to about a third. However the Home Office believes this is still too high and must be reduced.
The present police service pension scheme is one of the most expensive of the main public service schemes. The Government Actuary’s Department (GAD) has assessed the total cost of the police pensions scheme, in terms of value of benefits, as 32% of pensionable pay. This compares with local government schemes (see table 1) where total costs generally run between 17% and 18% of pensionable pay. Only the fire service pension scheme is more expensive than the police, with total costs of 34.75%.
The police pension scheme has come under mounting pressure because it has become more and more expensive. The main reason is that the service has doubled its size over the past 30 years, creating far more police pensioners.
The cost of police pensions increased steadily during the 1990s. Between 1990 and 1995, net pension expenditure – the excess of expenditure on pension benefits over receipts from employee contributions – rose by 51%. Between 1995 and 1997 expenditure rose by a further 25% in England and Wales and a further 40% in Scotland producing a total increase in the UK of some 90% or £390m (e640m) between 1990 and 1998. This compares with a rise of 48% in spending on police services generally and 50% in public expenditure as a whole.
This is imposing a huge burden on local government and their police authorities. The Association of Police Authorities (APA) estimates that police pensions costs will increase by approximately 8% in 2002, adding a further £89m to costs.
This will create a shortfall in police funding for this year. Dr Ruth Henig, chairman of the APA, says, “The increase in funding available for policing locally will be just 2.8%. To put this into context, police pay rose last year at 3.5% and pension costs will increase by approximately 8% this year. Our research shows that police authorities actually need an increase in funding of £371m just to stand still – leaving a shortfall of £162m.”
The high cost of the police pension scheme is due to several unusual features: a retirement age of 55 (although most police retire well before that) maximum benefits becoming payable after only 30 years service and a high proportion of retirements on medical grounds.
The last feature is the most costly. Medical retirements among police officers reached a peak of 59% of all retirements in 1990. It has declined from there to 31% in 2000/01, the latest period for which figures are available. This is below the target suggested by Her Majesty’s Inspectorate of Constabulary, in its 1999 report Lost Time. The report suggested that medical retirements should not exceed a maximum of 33% of all retirements each year. At the moment, 27 forces achieve the 33% target.
However, within the 31% there are wide variations between forces, with the percentages of medical retirements ranging between 9% in Lincolnshire police and 63% in the South Wales police (see figure 1).
The Police Pensions Review, a consultation document published in 1998 to bring police pensions into line with other public service pensions, said the variations in medical retirement levels could not be explained by differences between police forces. There was no correlation between the size and nature of a force (for example, inner city, suburban, rural) and the number of medical retirements
It concluded that the problem was essentially one of poor management: “These variations raise serious questions about the quality of management and medical decisions in forces are out of line with the best performers.”

The reform of the medical retirement system was included within the government’s police reform programme, launched in October 2000 by the then home secretary, Jack Straw. The current home secretary, David Blunkett, has now taken the matter up. He has said that he regards the issue of medical retirement as of “serious national importance to the police service”.
However, medical retirement is a sensitive issue among police. The case for a generous medical retirement provision is that the police do a potentially dangerous job and need to be sure that they will be properly looked after if they have to leave the force because of injury or ill health.
This case has been seriously weakened by the fact that medical retirement among police support staff – who do not face the risks that the police face – is even higher than among police. Figures for 2000/01 show that medical retirements of support staff were marginally higher than for officers – 34% compared with 31%.
This discrepancy is even clearer in the South Wales police where medical retirements by support staff as a percentage of all support staff retirements in the between April 1999 and January 2000 reached an astonishing 85.7%.
The Police Pensions Review said the proportion of police retiring early on medical grounds was unacceptably high and was not justified by the specific additional risks faced by police officers.
Her Majesty’s Inspectorate of Constabulary agreed and said there was evidence that medical retirement was being used as a ploy to enhance police pensions. A report by the inspectorate in 1999 said: “The high number of medical retirements at 26.5 years suggest that in effect management and the individual collude in a definition of a regulation, which allows medical retirement.”
Police who retire early can also take advantage of the indexing of police pensions. Although all police pensions are fully indexed, indexation comes into operation only from the age 55 in the case of normal retirement. In the case of medical retirement, index linking becomes operative immediately.
Although some police forces have tightened up on this abuse, the problem remains. Sir David O’Dowd, HM Chief Inspector of Constabulary, said in his report for 2000/01: “Regrettably, there continues to be evidence of the misuse of medical retirement provisions in a limited number of cases.” He suggested that the government should introduce legislation to prevent further abuse of the system. “It remains desirable to amend current regulations in ways that reduce the scope for abuse of systems designed to protect those in genuine need,” he said.
No changes to the regulations have yet been made. However, individual police forces are tightening up their procedures in an effort to reduce the number of medical retirements. The South Wales police, which had the highest incidence of early retirements last year, now take a proactive approach to sickness and medical retirements. Police officers on long- term sickness are encouraged to return to restricted or recuperative duties as soon as possible, subject to medical advice.
In a research study for the Home Office last year, Managing Medical Retirements in the Police Service, Jenny Arnott and Kaite Emmerson found that 20 forces were undertaking specific initiatives to reduce medical retirement costs. Techniques included greater use of restricted duties, development of leaving schemes and more stringent controls on the medical retirement process as a whole.
The chief methods were stricter criteria for medical retirement. The Metropolitan Police, for example, have a team of three people who focus exclusively on the medical retirement process. As a result they have halved their medical retirements from an annual total of 500 to 260.
The Police Reform Bill, published in January, says nothing about early retirement. The Home Office says that primary legislation is not necessary. However, the Police Negotiating Body (PNB), a pay and conditions forum which represents the APA, Association of Chief Police Officers (ACPO) and the Police Federation, has agreed to look at ways of achieving a fairer more consistent process of assessing early retirement. The PNB has now agreed in principle on “ways to deliver a fairer and more consistent approach towards early retirement due to ill health, so that forces can ensure where possible, the retention of officers in service where they are still capable of undertaking sufficient duties to justify continuing employment”.
One way of stemming the drain on public resources by the police pension scheme is to fund police pensions. Police pensions have been unfunded since the first Police Pensions Act in 1890. Uniformed officers in the police and fire services are not covered by the Local Government Pensions Scheme (LGPS). Instead they are covered by a scheme where pensions payments are funded on a pay-as-you- go (PAYG) basis. Police pensions are funded from the contributions of serving officers (now 11% of pay) and the annual revenues of police authorities.
The effect of this on public service pensions is considerable. Projections by the Audit Commission suggest that by 2008 one quarter of the fire service budget could be consumed by employers’ pension fund contributions. A comparable figure for the police would be between 15% and 20%.
The main objection to funding is the immediate cost of covering liabilities. The GAD has estimated that setting up a fully funded police pensions scheme across the board would cost about £25bn. However, ACPO and the APA believe that in the long term this is only option. They say that the government should at some point be prepared to introduce a new, properly funded, scheme for new recruits.
Yet the high costs of the police pension scheme are not simply due to the fact that there is no fund. The problem is the overall generosity of the scheme. The Home Office is now looking at a scheme designed to encourage officers to continue in service beyond 30 years. Subject to Treasury approval, the next step will be to set up a pilot scheme in at least one police force as soon as possible to identify likely take-up and to establish the business case for rolling the scheme out across the UK from April 2003 onwards.

The other strategy is to improve the management of ill health. The PNB has agreed on three principal objectives in this area:
q to ensure that personnel practices in forces and the pensions regulations combine to ensure that fair and effective decisions are taken on poor attendance and ill-health retirements;
q to ensure that, where possible, police officers are rehabilitated for duty rather than retired on ill-health grounds;
q to ensure that there is greater consistency in decision-making practice between forces?
This year a working party of the PNB will draw up detailed amendments and additions to regulations to meet these objectives.
There are precedents for this. The UK government is looking with interest at what has happened in other countries. In Bavaria, notably, the police authority has reduced the rate of early retirement among police from 58% in 1990 to less than 13% in 2000. This has been achieved through a combination of health screening before appointment, health promotion schemes, health provision, and permanent redeployment to other duties and post-retirement monitoring. Similar schemes operate in Australia, Canada and the Netherlands.
The Home Office also says it plans to introduce a national occupational health strategy for the police service later this year, to help forces to manage cases of ill-health more effectively.
The government hopes that the combined effect of these initiatives will check, if not reverse, the hitherto inexorable rise in medical retirement costs in Britain’s police forces.