Default Retirement Age of 65 is now Abolished

The Government, in spite of widespread opposition from employers and recent calls from the CBI to delay the abolition for a year, has gone ahead and has begun phasing out the default retirement age (“DRA”). This started on 6^th April 2011 and will be totally abolished from 1^st October 2011. On or after 1^st October 2011 employers will only be able to operate a compulsory retirement policy if it can be objectively justified.

Under the old DRA procedures employers had to give a minimum of six months’ notice to employees that they will be retired at or after the age of 65, and advise them of their right to request to work beyond retirement. This is no longer the case.

Transitional Provisions

Employers must not issue any new notifications of compulsory retirement to employees after 6^th April 2011 (under the old rules).

In summary, during the period from 6^th April to 30^th September 2011, retirement procedures which have already begun (under the old rules) can continue to completion if:

• a notification of impending retirement was issued by the employer prior to 5^th April 2011;
• the date of retirement falls before 1^st October 2011;
• the DRA procedure, as set out in the previous Employment Equality (Age) Regulations 2006, is followed correctly (including giving serious consideration to any employee requests to stay on);
• the other requirements of the former DRA procedure are met (e.g. the person is 65 or over; or is the employers' normal retirement age if this is higher than 65).

 Retirement on or after 1^st October 2011

The DRA will no longer apply with effect from 1^st October 2011. This means that, on the face of it, retirement at any age on or after this date will be unlawful, unless employers can objectively justify it.

Retirement will be removed from the list of potentially fair reasons to dismiss someone, currently set out in the Employment Rights Act 1996 (“the Act”). This means that employers who do want to ‘retire’ one of their employees will have to rely on one of the other five remaining, permitted reasons listed in the Act; namely capability, conduct, redundancy, illegality or some other substantial reason (“SOSR”).

The Government has worked alongside ACAS to formulate guidance for employers on how to effect retirements after 1^st October 2011 and further helpful details can be found at www.acas.org.uk/retirement. The guidance makes it clear that older workers can still retire voluntarily; they simply cannot be compelled to retire in the manner or at the age previously recognised. T

The change to the law does not mean that employers will never be able to retire anyone. If employers are able to objectively justify retiring employees after 1^st October 2011, it is simply likely to amount to a SOSR dismissal (see above). A fair procedure will still need to be followed in all the circumstances and employers should take advice on a case by case basis as every employee’s personal circumstances or health and thus ability to perform their position will necessarily be different.

Insured Benefits and Share Schemes

The Government has recognised that certain group-risk insured benefits (for example: medical insurance, life cover and life assurance) cost employers more for older staff. It has therefore introduced an exemption in respect of these benefits, permitting employers to cease providing them for employees over the age of 65.

What should Employers be doing now?

It is a good idea for employers to assess the age profile of their current workforce and take careful stock of any on-going retirement procedures.

Consider whether or not you want to retain a contractual retirement age for your employees beyond 1^st October 2011, or remove this provision and operate without one. The former may prove problematic, bearing in mind that employers will be expected to explain why they wish to retain a retirement age and provide clear objective justification for their choice – although an early judicial decision suggests it may be possible. The latter option will undoubtedly encourage the need for increased dialogue with employees through carefully managed performance and appraisal systems (even workplace mediation), in order to administer effective staff planning.

What we suggest

It is still perfectly acceptable to initiate a dialogue with employees who are reaching the age of 65 in order to assess what their intentions are with regards to their continuing to work (if at all) beyond 65. By having such informal discussions in the lead up to the employee’s 65^th birthday employers will be well aware in advance of their employee’s attitude to working past 65 and/or stand more of a chance or being able to agree a workable solution for both parties such as a phased reduction in hours or agree a long stop date. Careful management of expectations can only be a good thing.