Government brings forward review of default retirement age

The default retirement age (DRA) in the United Kingdom is 65 years. Various campaign groups have argued its merits and demerits. It allows companies and individuals to plan better for their exit from employment. However, forcing workers to retire seems to contradict the principle of non-discrimination and deprives the economy of older workers’ skills. The government had stated that it would review the DRA in 2011, but it has now brought this review forward to 2010.

On 13 July 2009, the government launched a strategy paper Building a society for all ages (636Kb PDF) intended to help the country respond to the challenges posed by an increasingly ageing society. As part of this strategy, the government announced that the review of the default retirement age (DRA) of 65 years – which had been scheduled for 2011 – will be brought forward to 2010.

Announcing the change to the review date, the Minister for Pensions and the Ageing Society, Angela Eagle, explained: ‘It is time to look again at this. Some people prefer to take early retirement, others prefer to keep working. We want to give older people flexible retirement options.’

Background

Under current legislation, employers can require all staff to retire at the age of 65 years, regardless of their circumstances. However, the Employment Equality (Age) Regulations 2006 (UK0603029I) included a duty for employers to consider an employee’s request to continue working past retirement age. At the time that it introduced these regulations, the government added that it would review the DRA in 2011, and consider its removal if it was deemed no longer appropriate.

The DRA has been under pressure for a number of years. Among others, the charity Age Concern has been campaigning to secure the end of the DRA and backed the legal challenge to the DRA that resulted in a ruling by the European Court of Justice (ECJ) in March 2009. The ECJ ruled that the DRA could remain if age-related retirement was justified by specific employment policy aims. The case has now returned to the UK courts. While the ECJ judgement did not determine that the DRA was discriminatory, campaigners believe that the ruling will require a tough standard of proof on the part of the UK government to justify why forced retirement ages are needed. Furthermore‚ they believe that the reasons must be based on social or labour market needs rather than on the interests of employers.

In April 2009, in light of the judgement by the ECJ, a report (2Mb PDF) by the House of Commons Work and Pensions Committee recommended that the government should remove the regulation that permits employers to require employees to retire at the age of 65 years. It stated:

This regulation contradicts the government’s wider social policy and labour market objectives to raise the average retirement age and allow people to continue to work and save for their retirement.

Reaction of social partners

The Director of Employment Policy at Confederation of British Industry (CBI), Katja Hall, commented:

The government said its review of the default retirement age would be in 2011, and now it has changed its mind. This is disappointing; especially at a time when so many businesses are under pressure. Having a default retirement age helps staff begin the process of deciding when it is right to retire, and helps firms plan ahead with more confidence. At the moment, anyone can ask to work beyond the age of 65, and their employer must consider their request.

CBI research finds that 81% of such requests are accepted, showing that companies do not want to lose good people, whatever their age. Ms Hall noted that some people can happily work in their existing job beyond the age of 65 years, but this is not possible for all occupations, and companies with small numbers of staff have particular problems adapting jobs to the needs of older workers. In the opinion of the employer organisation, no one has yet suggested a workable alternative to the default retirement age.

However, the General Secretary of the Trades Union Congress (TUC), Brendan Barber, declared that he was encouraged by the government’s decision:

We welcome the early review of the default retirement age. It cannot be right that an employer can sack someone simply for being too old. Employees should have a choice – neither should they be forced by employers to give up work, nor forced by inadequate pensions into working longer than they should. A key challenge as we live and stay active longer is developing the right kind of jobs, support and training for older workers.

Duncan Adam, Institute for Employment Research, University of Warwick

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