Will you still be needed when you're 65?

If you’re due to turn 65 on or before 30th September 2011 you might consider yourself either very lucky or very unlucky, depending on whether you have a desire to keep active and working, or instead wish to retire and reap the benefits of years of hard work. That’s because the Government is proposing to phase out the Default Retirement Age (DRA) from 1st October 2011. From this date, employers will no longer be able to justify a dismissal for compulsory retirement by relying on the DRA.

As the law presently stands, under the Employment Equality (Age) Regulations 2006, employees can be made to retire at the DRA, which currently stands at 65. The legislation provides that an employer must serve an employee with between six and twelve months' written notice of their intended retirement date. Although employees have the right to request a further period of employment beyond this date, and even appeal if their request is denied, the employer does not have to provide reasons for refusing a request, except to ensure they are not discriminatory. Employers will no longer be able to issue these notifications from 6th April 2011.

A recent survey has shown that two thirds of people would like to work beyond the age of 65 and 10% do not want to retire at all. Although it is unclear whether the motivation behind these results is an actual desire to work or financial necessity, if the survey is representative of the employee feeling in this country then the implementation of the proposals is likely to prove popular.

One group that isn’t quite so keen on the proposals is business organisations. The CBI has said that “Scrapping the DRA will leave a vacuum, and raise a large number of complex legal and employment questions, which the Government has not yet addressed.” Similarly, the Institute of Directors has stated: “We greatly regret the Government’s decision to abolish the DRA. We do not see how the removal of a mechanism that gives employers flexibility in managing their workforce is compatible with the Government’s stated desire to boost enterprise and de-regulate the employment arena.”

So is this the case or are these employers’ organisations panicking unnecessarily? The Government believes that removing the ‘right to request’ procedure will bring substantial savings for employers through reduced admin and industrial tribunal costs as well as increased profits through increased labour supply. They will also still have the right to retire staff at 65 if they can ‘objectively justify it’, that is, the employer has a legitimate aim and a proportionate method is used to achieve that aim. And while the CBI warns that this will result in more tribunals, they may be heartened by a recent case heard by the Court of Appeal, Seldon v CWJ, which ruled that a firm of solicitors was justified in retiring a partner at 65. The justification given for the retirement was that it would allow younger associates to move up the ranks, facilitate the planning of the partnership, give the workforce long-term expectations in relation to vacancies, and limit performance management being used as a method of expulsion. Rejecting the claim, Lord Justice Laws said “My experience would tell me that it’s a justification for having a cut-off age that people will be allowed to retire with dignity.”

The Government hopes that businesses that already manage without a retirement age will use their experience to help others and that employers will put forward suggestions as to what additional support might be useful to help them adapt. A consultation is currently underway, concentrating on proposals for managing the transition period and looking at the guidance that may be required by both employers and employees to assist them in discussing the issue of retirement age.

In a separate move, Chancellor George Osborne announced on 20th October that as part of the cuts in the Government’s Comprehensive Spending Review the State Pension Age will be accelerated to 66 years for both men and women by 2020. Although there is much debate surrounding the effect this move will have, it is hoped that it will fund a more generous state pension in the future.

For further information on this or any other area of employment law , please contact Katy Adcock on 01223 417200.

The information given in this article is of a general nature only and should not be considered as advice applicable to any particular situation for which specific request should be made to us.

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