Government confirms end of default retirement age

The government has confirmed that it is to press ahead with the scrapping of the default retirement age, despite the concerns of some employers' groups.

From 1 October this year, employers will no longer be able to force their staff to retire purely on the grounds of reaching 65 years of age and employers will only be able to operate a compulsory retirement age where they can “objectively justify” doing so.  

Given the need to give employees six months' notice of their compulsory retirement, in effect, the last date on which employers will be able to force compulsory retirement is 6 April, while those notified between 30 March and 6 April may be able claim compensation of up to eight weeks' pay under the 'short notice' provisions of the Default Retirement Age. Draft regulations to implement the changes are expected by the end of month.

The government also said that it would introduce an exception for employers that currently voluntarily offer group risk insured benefits such as income protection, life assurance, sickness and accident insurance and private medical cover to their staff to enable them to implement a cut-off point beyond which such benefits are currently no longer offered. However, this measure will not protect employers who self-insure these benefits, who will still have to objectively justify their withdrawal at any given age.

The Advisory, Conciliation and Arbitration Service (ACAS) has published guidance for employers, which is available at the following link: New guidance from ACAS.

Employment Relations Minister Edward Davey said: “Retirement should be a matter of choice rather than compulsion – people deserve the freedom to work for as long as they want and are able to do so. Older workers can play an incredibly important role in the workplace and it is high time we ended this outdated form of age discrimination.

“We are putting in place support to help business adapt to the change, but it is important to remember that about two-thirds of employers already operate without fixed retirement ages – and many of those with retirement ages already offer flexibility for workers to work longer."

However, the CBI has called for a one-year delay in the scrapping of the default retirement age to allow employers more time to prepare and Rachel Dineley, age discrimination specialist at law firm Beachcroft, said that the measure could create a considerable burden for some employers.

"There is a lot to consider and plan for if  businesses and other organisations are going to manage a smooth transition to a new way of dealing with an ageing workforce,” she said. “There are a good many positive steps that can be taken, but it will require a commitment and resources which some employers will struggle to give.

"The prospective cost to employers will vary considerably, depending  on the nature of  the organisation, age profile of its workforce and adequacy of pensions provision. In many cases it will lead to an increase in cost of both insurance benefits and redundancy compensation and there may also be a cost involved in making 'reasonable adjustments' when managing any potential disability issues."

Dineley added: "A key concern raised by the CBI was how an employer can manage an employee whose performance has started to decline – this will require careful management on the part of the employer, and while ACAS has produced guidance, the reality is that managers will need support and training to understand and proactively address problems where they arise. No ageist assumptions should be made along the way. The challenges will vary enormously, depending on  the sector and the nature of work undertaken by each individual."

The results of the government's consultation can be found here.