Mr Penn (53), who became chief executive in July 1989, has been off work since June. The council said it received a certificate from an independent doctor confirming that he was 'permanently incapable of discharging his duties as chief executive'.
Bradford's corporate executive sub-committee was today due to formally terminate Mr Penn's employment. He will immediately have access to his pension plus an enhancement of six and two-thirds years to which he is entitled under the Local Government Pension Scheme.
Bradford suffered internal Labour Party strife earlier this year when former leader John Ryan was ousted by rival Ian Greenwood. The council was also involved in an inquiry into alleged bullying and fighting on local election night in May (LGC, 17 July).
'I wish Richard well in the future and hope his retirement will allow his health to improve away from the daily stress of his job with the council.'
Cliff Williams, regional secretary of Mr Penn's union, Unison, said: 'It is obviously a great disappointment that Mr Penn is having to retire and it demonstrates the fact that stress can and does lead to too many high-calibre officers in public service succumbing to illness.'
Mr Penn said: 'I am sorry to be leaving Bradford council as I have enjoyed my 10 years as chief executive. I have had the privilege of working with many talented and committed people.'
Philip Robinson, acting chief executive and strategic director for corporate services, will continue to run the council until it makes a decision on replacing Mr Penn in the new year.