The Government has announced that it will remove the default retirement age of 65 from October 2011, with a phasing out process starting from April 2011.
The Default Retirement Age (DRA) was introduced in 2006 and it has allowed employers to force staff to retire at 65 regardless of their circumstances, or their desire to continue working.
However, as people are living longer, healthier lives, the Government is taking steps to help and encourage people to work for longer. Other steps include reviewing when the state pension age should increase to 66 and re-establishing the link between earnings and the basic state pension.
Employment Relations Minister Edward Davey said: “Older workers bring with them a wealth of talent and experience as employees and entrepreneurs. They have a vital contribution to make to our economic recovery and long term prosperity.”
Pensions Minister Steve Webb said: “Many older people want to work after age 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.”
The Government believe that their proposal will help employers by removing the administrative burden of statutory retirement procedures. With the DRA removed there is no reason to offer employees a ‘right to request’ working beyond retirement or for employers to give them a minimum of six months notice of retirement.
Some individual employers may be permitted to operate a compulsory retirement age, provided that they can objectively justify it. However, the scope of this appears quite narrow, with the Government giving examples of air traffic controllers and police officers.
A consultation period has been opened in which the Government asks whether they could provide additional support for individuals and employers in managing without the DRA or statutory retirement procedure. This includes the possibility of future guidance or a more formal code of practice on handling retirement discussions.
The new plans allow for a six month transition from the existing regulations, with the DRA being phased out from April 2011.
Our advice to employers is to check to see if you have any employees that are due to turn 65 before 1 October 2011, and if you had planned to retire them on their 65th birthday then ensure that notice is given before 1 April 2011 otherwise you cannot use ‘retirement’ as the fair reason to terminate their contract.