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Government announces an end to the default reirement age

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The Government is to scrap the default retirement age (DRA).

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.

Currently employers can make staff retire at 65 regardless of their circumstances but this is set to change as people are living longer, healthier lives.

This measure is one of the steps Government is taking to 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. With the DRA removed there is no reason to keep employees ‘right to request’ working beyond retirement or for employers to give them a minimum of six months notice of retirement.

Employment Relations Minister Edward Davey said: "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.

"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.

"We are committed to ensuring employers are given help and support in adapting to the change in regulations, and this consultation asks what kinds of support are required."

Pensions Minister Steve Webb added:"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."

Although the Government is proposing to remove the DRA, it will still be possible for individual employers to operate a compulsory retirement age, provided that they can objectively justify it. Examples could include 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 statutory retirement procedure. This includes the possibility of future guidance or a more formal code of practice on handling retirement discussions.

Views are also being sought on whether removal of the DRA could have unintended consequences for insured benefits and employee share plans.

Commenting on the announcement,Owen Warnock, partner at Eversheds, said: "It will still be open for employers to have a compulsory retirement age but they must be able to justify that for themselves under the Employment Equality (Age) Regulations.  A judgment of the Court of Appeal published yesterday (Seldon v Clarkson, Wright and Jakes) seems to make that much more possible. 

"That case said that compulsory retirement for partners (who are not covered by the DRA in regulation 30)  - in order to avoid the need for performance management of partners whose performance falls off because of age - is justified.  If that is right, it would seem to apply also to employee retirement once regulation 30 is abolished since the Court of Appeal drew no distinction between the two.

"So, will the government's announcement make any difference in practice: will employers maintain compulsory retirement ages?  Probably not because the Seldon judgment is hard to follow and the reasoning is not very convincing, with the result that an appeal to the Supreme Court must be a real possibility.  Also, even if the Seldon judgment stands, most employers simply won't want to face the risks involved in trying to defend on their own a compulsory retirement age without the support of regulation 30."

 


The consultation is open from today until 21 October 2010.