UK Government to abolish retirement age

The pros, the cons, and opportunities to get flexible

"We believe everyone should have the freedom to retire at the time that’s right for them."
                       - 'Phasing out the Default Retirement Age', July 2010

Demographic and economic realities have finally come together to bring about the abolition of the default retirement age in the UK.  And more enlightened attitudes to both age discrimination and flexible working practices underpin the changes that are being proposed.

Currently employers can enforce retirement on their employees at age 65, and it is estimated that around 100,000 people retire against their will each year.  Around 12% of workers are employed beyond retirement age, up from 8% in 1990.

According to the consultation document Phasing out the Default Retirement Age (DRA), there are now 4 adults under 65 for every one over 65, but this will drop to 3:1 within 10 years and 2:1 within 30 years.  As many people have not saved adequately for a pension, being able to work for longer is good both for the national finances and for personal finances.  According to the document:

And as people are living longer and healthier lives, it does not make sense to insist that people retire before they want to - it's discriminatory and an offence to personal freedom.

The document speaks of 'phasing out' the DRA, but as with many other initiatives of the new coalition government, they are not hanging about.  From April 2011 employers will no longer be able to use the DRA as a way to justify an age-based compulsory retirement. 

If they maintain a compulsory retirement policy, this will be open to legal challenge unless they can show that it is objectively justified, e.g. in terms of health, welfare and safety or particular economic or efficiency factors.  But simply saving money because discrimination is cheaper than non-discrimination is not acceptable.

The EEF - the Manufacturers' Organisation - and the Confederation of British Industry (CBI), have both objected to the proposals, both in terms of the short timescale for change and the proposals themselves.

David Yeandle, EEF’s Head of Employment Policy, said:-

“Many manufacturers will be seriously concerned about this change in policy which will make workforce planning more difficult. The proposed timetable also gives employers virtually little or no time to alter their policies and practices before such an important change in employment legislation is introduced.”

“There is also a real danger that it could open a pandora’s box with the onus being placed on employers to prove whether older employees are capable of continuing in their current role. Inevitably, this could lead to employment tribunal cases from some older employees who have been dismissed rather than allowed to retire.”

John Cridland, CBI Deputy Director-General, has also condemned the move:

“The decision to abandon the DRA leaves business with many unresolved problems, and the Government’s timetable to scrap it will give companies little time to prepare.

“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. This will create uncertainty among employers and staff, who do not know where they stand. There will need to be more than a code of practice to address these practical issues; we will need changes in the law to deal more effectively with difficult employment situations.

“For employers, these proposals could make workforce planning and providing some employment benefits, such as critical illness cover, next to impossible.

“A default retirement age helps staff think about when it is right to retire, and also enables employers to plan more confidently for the future. In certain jobs, especially physically demanding ones, working beyond 65 is not going to be possible for everyone.”

The consultation document, however, asserts that only a minority of employers have a compulsory retirement policy at the moment.  And most employers usually grant requests to work beyond retirement age.

Scope for flexible working recognised

The proposals also recognise the importance of flexible working in moving towards more flexible approaches to retirement age:

"A further consideration for possible Government action is how employers and employees might be encouraged to discuss potential flexible retirement arrangements and options for flexible working, with the aim of extending working lives.

"Depending on scheme rules, the employee may also be able to draw part of his or her pension while continuing to work part-time and these options could also form part of the discussion."

The foreword to the consultation document also makes the link to the role older workers can play in helping to secure economic recovery, not least in starting new businesses:

"Older workers offer a wealth of talent and experience – as employees and entrepreneurs – and are making a vital contribution to securing our country’s recovery and future prosperity.

"The Government is committed to ensuring that older workers, who want to get ahead in their careers, develop new skills and start new businesses have the freedom to do so. We want to make changes so that nobody is deprived of the opportunity to work simply because they have reached an age limit.

"Smart businesses already recognise this and are embracing new ways of working to draw on the expertise that older workers bring.

"Individuals need to adapt, too, as we move away from linear career progression and early retirement, towards more flexible working practices, regular job moves and even changes in occupation."