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The uproar over the compulsory retirement age continues…

f you’re an employer, or coming up to retirement, you’d have had to have your head buried in the sand not to be aware of the government’s plans to phase out the default retirement age. Having published its response to the consultation document, the government has confirmed that proposals will be implemented from 6th April 2011.

The government did emphasise that ‘these changes do not mean that individuals can no longer retire at 65 – simply that the timing of that retirement becomes a matter of choice rather than compulsion’.

As things currently stand, employers can retire employees aged 65 or over without breaching the age equality laws – part of the Equality Act 2010, which came in late last year. As with most employment law changes, the legislation provides a set procedure that must be followed. This includes giving the employee six months’ notice and stipulating that an employer must consider any request the employee makes to continue employment.

Following the legislative changes due to come, employers will risk a discrimination claim if they dismiss an employee because of his age. Whether directly or indirectly, unless you can objectively justify it as a ‘proportionate means of achieving a legitimate aim’, you may be at risk of breaching the law.

According to government plans, a ‘phasing out’ plan has been suggested. This will allow business to complete retirements already in progress. A transitional period will run from 6 April 2011 to 1 October 2011, during which employers cannot issue new notifications of retirement under the default retirement age. From 1 October 2011, retirement using the default retirement age exemption (without objective justification) will end.

But there has been considerable back-lash from the business community as to concerns about additional cost and availability of seeking appropriate insurance. In response to this, the government states that it intends to introduce a specific exemption in relation to group risk insured benefits. This will allow certain benefits to be withdrawn for employees aged 65 or over, and will rise in line with the state pension age. The government has stated that it does not believe that the abolition of the default retirement age will affect occupational pension schemes or the setting of a ‘normal retirement age’ for the purposes of occupational pension schemes.

Full guidance is expected from the government shortly, and will be published here as soon as possible.

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