Government scraps retirement age
Jul 29 2010
The office birthday cake of the future
The default retirement age (DRA) is to be abolished by October next year under new proposals put forward by the government.
Currently employers can make staff retire at 65 regardless of their circumstances. The new plans allow for a six-month transition from the existing regulations, following the announcement in the Budget that the DRA would be phased out from April 2011.
These measures, says the government, will help and encourage people to work for longer against ‘the backdrop of demographic change’. Others include reviewing when the state pension age should increase to 66 and re-establishing the link between earnings and the basic state pension. The consultation also proposes to help employers by removing the administrative burden of statutory retirement procedures, such as employees having the ‘right to request’ working beyond retirement or for employers to give them a minimum of six months notice of retirement.
The short timescale of the changes raises serious questions for employers. John Cridland, CBI deputy director-general, states: ‘Scrapping the DRA will leave a vacuum, and raise a large number of complex legal and employment questions, which the government has not yet addressed. This will create uncertainty among employers and staff, who do not know where they stand. There will need to be more than a code of practice to address these practical issues; we will need changes in the law to deal more effectively with difficult employment situations.’
Employment relations minister Edward Davey argues that the reforms provide individuals with extra freedom and control. ‘With more and more people wanting to extend their working lives, we should not stop them just because they have reached a particular age. We want to give individuals greater choice and are moving swiftly to end discrimination of this kind.’
Steve Webb, pensions minister, suggests that many older people want to work beyond the age of 65 and have a wealth of skills and experience that are not being used. ‘We want to get rid of the default retirement age so that if they want to work they can do so. By spending longer in the workforce they can also have a better pension in retirement,’ he says.
The government states that it will still be possible for individual employers to operate a compulsory retirement age, provided that they can objectively justify it, like air traffic controllers and police officers. The consultation asks whether the government could provide additional support for individuals and employers in managing without the DRA or a statutory retirement procedure, and includes the possibility of future guidance or a more formal code of practice on handling retirement discussions.
For Cridland, it’s essential that all the consequences of abolishing the retirement age are given full consideration: ‘For employers, these proposals could make workforce planning and providing some employment benefits, such as critical illness cover, next to impossible.
‘A default retirement age helps staff think about when it is right to retire, and also enables employers to plan more confidently for the future. In certain jobs, especially physically demanding ones, working beyond 65 is not going to be possible for everyone.’
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