Government confirms abolition of default retirement age

In January 2011, the UK government announced its intention to stop compulsory retirement for people aged 65, despite criticism of the move by employers’ groups. Campaigners against age discrimination and unions welcomed the change. However, official guidance makes it clear that employers will be able to dimiss staff no longer capable of carrying out their work. Official figures show more than two thirds of British employers have already eliminated fixed retirement ages.

On 13 January 2011, the Department for Business, Innovation and Skills (BIS) published a document (111Kb PDF) responding to a public consultation over its plans to phase out the statutory default retirement age (DRA) of 65 (UK1008019I). It confirmed that the government would be phasing in the change between April and October 2011 despite calls by employers’ organisations for a delay in its implementation. At the same time, the Advisory, Conciliation and Arbitration Service (Acas) published guidance (344Kb PDF) intended to help businesses adapt to the removal of the DRA.

Employment Relations Minister Ed Davey said:

Retirement should be a matter of choice not compulsion. People deserve the freedom to work for as long as they want and are able to do so. Older workers play an incredibly important role in the workplace and it is high time we ended this out-dated form of age discrimination.

Impact of the change

From 6 April 2011, employers will no longer be able to issue any notifications for compulsory retirement under the DRA provisions introduced by the Employment Equality (Age) Regulations 2006 (UK0603029I). Between 6 April and 1 October, only people who were notified before 6 April, and whose retirement date is before 1 October, can be compulsorily retired using the DRA. After 1 October, employers will not be able to use the DRA to compulsorily retire employees. The guidance published by Acas makes clear that employers will be able to conduct performance appraisals and fairly dismiss staff who are no longer capable of doing their jobs properly.

Although the DRA is being removed, individual employers will still be able to operate a compulsory retirement age provided it can be objectively justified. According to the government, examples could include air traffic controllers and police officers.

The government has also decided to enable employers to withdraw group risk-insured benefits such as medical cover and life assurance at age 65 as these are expensive to provide for older workers.

Abolishing the DRA is expected to result in further increases in the number of people – currently around 850,000 – who continue to work beyond 65. Data from the Office for National Statistics (ONS) show that 8.5% of over-65s were in the workforce in the three months to October 2010, with a further 2.2% describing themselves as unemployed but looking for work. The figures two years previously were 7.3% and 2.8% respectively. According to the government, more than two-thirds of employers, including household names such as B&Q, Nationwide, BT and Marks & Spencer, already operate without fixed retirement ages and benefit from the retention of older workers.

The change is one of a number of steps the government is taking to encourage people to work longer against the backdrop of demographic change. The announcement of the abolition of the DRA coincided with the publication of the Pensions Bill currently going through parliament, which will increase the state pension age to 66 by 2020.

Social partner reaction

A number of employers’ groups were sharply critical of the government’s decision. John Cridland, Director-General of the Confederation of British Industry (CBI) commented:

The impact on employers, especially smaller ones, will be considerable . . . Employers accept that more people will want to work beyond 65 as the population ages, but the government has not recognised the fundamental question, which is how should employers manage retirement on the basis of a performance appraisal.

According to the CBI: ‘Less than three months is not enough time for businesses to put in place new procedures. The outcome will be more unpleasant and costly legal action.’

The Institute of Directors (IoD) said the move was ‘incompatible with the government’s stated desire to boost enterprise and create new jobs’. The British Chambers of Commerce (BCC) said: ‘The government has pledged to reduce the burden of employment law, yet scrapping the [DRA] will simply add to the raft of new legislation that is going to hit businesses in April’.

However, the age discrimination campaign group the Employers’ Forum on Age (EFA) commented:

This is good news for older workers and employers have nothing to fear from the removal of retirement ages . . . Employers have been preparing for this change and many are realising the benefits it will have for both them and employees.

The Trades Union Congress (TUC) welcomed the government’s announcement. TUC General Secretary Brendan Barber said:

This will stop employers from dismissing people on an arbitrary basis just because they have reached 65. Employees should be judged on their ability to do the job, not their age.

Mark Hall, IRRU, Warwick Business School

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