It is clear we live in an ageing society and all the political parties will be keen to court the grey vote in the run up to the general election - older people are much more likely to turn out to vote than the under-30s. As people remain healthy for longer and as pension benefits become less generous (particularly where pension investments have been substantially diminished as a result of the recession), more and more people are keen to continue working after 65. This is partly what drove the High Court in the Heyday litigation to indicate in late 2009 that having a default retirement age of 65 was not sustainable and it is what is behind the equality commission's campaign to abolish it altogether.
While abolishing the default retirement age altogether is a laudable aim in terms of allowing older workers the freedom to continue in employment for as long as they want, it does not appear that either the equality commission or the Government has thought through fully what this will mean in terms of costs to employers, let alone the potential impact it has on younger workers who are looking to break into the job market.
Termination of employment by reason of retirement has long been a dignified and uncontroversial way to let people go who all too often are simply not performing (or not able to perform) as well as they should. They may also be stuck in their ways or can't cope with technological or other changes - and that's not just stereotyping. A lot of employers have traditionally been lenient with difficult employees in the knowledge that they would automatically leave in a few months or years. If the retirement age is abolished, then employers may have to deliver some very harsh and upsetting messages as they may be forced to deal with those underperformers in more direct terms. This will also, inevitably, give rise to more claims in the already woefully underfunded and overstretched employment tribunal system as employers struggle with implementing proper performance management procedures. In addition, if employers are no longer able compulsorily to retire employees at a certain age, it will make effective succession planning extremely difficult. This will inevitably lead to younger employees becoming disincentivised as they see no way up within their organisation.
The current retirement process under the age discrimination legislation generally works well. Employers and employees know what is required and expected. Employees already have the right to request to work after their normal retirement age and employers must seriously consider such requests. The only real flaw in the system is that employers are not obliged to give any reason for refusal of such a request. It is the only area of employment law that so freely allows employers to terminate an employee's employment without giving any proper reason. If the Government wishes to make it easier for employees to continue working, this would be an obvious place to start, although care would need to be taken to minimise confrontation with employees about the validity of any such reasons and retain the dignity of a termination by reason of retirement.
Finally, a key area that has not been addressed in the demands for the abolition of the retirement age is how employers will deal with the additional cost of continuing benefits for employees who work beyond 65. Employers are often reluctant to continue employment after 65 not because they don't want to, but because they can't afford to. At present the cost of benefits such as life assurance and private medical cover increases significantly after age 65, if such cover is available at all. If the Government is serious about encouraging employers to retain workers for longer, this is an issue that needs to be addressed - at present, it often isn't economically viable for employers to keep people on if they have to continue to provide benefits as they did before.
A more sensible approach than total abolition is an increase in the default retirement age, possibly staggered over a period of years (whether in accordance with or ahead of the state pension age which is due to increase to 66 in 2024) and preferably in tandem with an increase in rights to request flexible working for older employees as suggested by the Equality and Human Rights Commission. It is widely acknowledged that 65 is no longer an appropriate retirement age, especially as life expectancy increases, but employers need something around which to build conversations with employees rather than having to continue indefinitely with no idea as to an employee's plans. Whatever age is settled upon, the default retirement age should be reviewed periodically as life expectancy increases and society changes. There is nothing to be gained from its total abolition.
Anne Pritam is a partner and Beth Hale an associate at Stephenson Harwood
