7. In Schedule 7 —
(a)for paragraph 3 substitute—
“3.—(1) Except as provided in paragraph 4, a person (P) falls within this paragraph if—
(a)P satisfies either Conditions 1, 2 and 3 or Condition 4, and
(b)P makes an application under regulation 107 for retirement benefits on the basis that Case C, and no other Case (apart from Case A), applies to P’s reckonable service.
(2) Condition 1 is that P left all pensionable employment because P was incapacitated (or this was one of the reasons why P left all pensionable employment).
(3) Condition 2 is that P makes the application under regulation 107—
(a)before leaving excluded employment, or
(b)within 2 years of the last day of pensionable employment.
(4) Condition 3 is that immediately before making the application under regulation 107 P is incapacitated and is likely to be incapacitated permanently.
(5) Condition 4 is that P’s ability to carry out any work is impaired by more than 90% and is likely to be impaired by more than 90% permanently.
(6) Where P satisfies Conditions 1, 2 and 3, the illness or injury P relies upon in the application under regulation 107 must be—
(a)the same illness or injury which was the reason or, as the case may be, one of the reasons for P leaving pensionable employment, or
(b)connected to or consequent upon that injury or illness.”,
(b)after paragraph 4(2) insert—
“(2A) But Condition A does not apply if—
(a)D made an application to the Secretary of State before D’s death for retirement benefits on the basis that Case C, and no other case (apart from Case A), applied to D’s reckonable service;
(b)at the same time that D made the application mentioned in paragraph (a), D made an application for commutation of the ill-health pension (and any total incapacity pension payable under regulation 65) under regulation 118 (commutation: serious ill health); and
(c)following consideration of the applications mentioned in paragraphs (a) and (b), the Secretary of State determines that the ill-health pension and, if applicable, any total incapacity pension payable with it, should be commuted.”,
(c)after paragraph 12(3), insert—
“(3A) P does not fall within paragraph 10 if—
(a)P makes the application mentioned in paragraph 10(1)(e);
(b)P’s application is made in accordance with paragraph 12(1) or (3)(b); and
(c)P returns to pensionable or excluded employment before the entitlement day specified in P’s application.”.