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The Default Retirement Age: Why was it scrapped in 2011?

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09 February 2011: Following the announcement at the end of last year that the Default Retirement Age was to be abolished, the Government have now published draft regulations which are to come into force on 06 April 2011.

As expected, the Regulations will make it unlawful for an employer to require an employee to retire simply because they have reached the age of 65 (the Default Retirement Age).

At present employers are required to give their staff notice of retirement between 6 and 12 months prior to the termination of their employment and to allow them to request to work beyond the age of 65. Due to this the Regulations also include some transitional provisions which deal with those employees who are given notice before 6 April 2011. These provide employers with the opportunity to continue with their intention to retire these employees as long as the notice is given before 6 April 2011 and the employee reaches the age of 65 on or before 30 September 2011.

However, there is still some uncertainty as to whether such retirements will be permitted to take effect after 01 October 2011, as it had originally been thought that this would be the cut off date. It now appears that retirements under the Default Retirement Age may continue up to 05 April 2012 as this will be the last date on which the maximum 12 months notice can be given.

The Regulations also make it clear that it will not be unlawful to cease providing insurance benefits to employees when they reach the age of 65.

For more information, please contact our Employment & HR team.

14 January 2011: Following its consultation on the issue of Default Retirement Age, the Government have announced that, following a transitional period starting on 06 April 2011, it is to be abolished from 01 October 2011.

New regulations to implement the change are expected to be published shortly making it unlawful to compel an employee to retire when they reach the age of 65.

As the phasing out period is due to start in April, employers only have a short time in which to take advantage of the Default Retirement Age while it is still available. Employers should carefully assess the implications that this change will have on the make-up of their workforce and, where necessary, initiate the retirement process for those employees who will be 65 before October 2011.

Should you require guidance on the default retirement age or as to the correct procedure to follow when retiring an employee please contact our Employment & HR team on 01332 226 149.

10 July 2010: The subject of whether a Default Retirement Age of 65 for employees is lawful has been under constant debate since the introduction of the Employment Equality (Age) Regulations 2006.

Employers may have breathed a sigh of relief towards the end of last year when the Government successfully defended the legal challenge to the Default Retirement Age made by Age Concern and Help the Aged (widely known as the “Heyday” case), however, things are not quite as they seem.

The judge in the Heyday case placed weight on the fact that the Default Retirement Age of 65 was scheduled to be reviewed in 2010 and he indicated that any attempt to keep the Default Retirement Age at 65 would be unlikely to be lawful, particularly in light of the current climate.

There are currently more than 1.4 million people working past state pension age, according to recent labour market figures from the Office of National Statistics. This is up from 1.2 million people the year before.

The Government has recently concluded a wide-ranging consultation exercise to gather views and opinions from people who have experienced the Default Retirement Age in operation. This consultation closed on 1 February 2010 and we all wait with interest to learn if it’s findings.

Until the findings of the consultation are announced employers are left to speculate whether a Default Retirement Age of some form will be retained or whether it will be abolished altogether. One thing that seems certain, however, is that a Default Retirement Age of 65 will not remain.

For those who don’t know, state pension age is set to gradually increase to 68 by 2046. Therefore, state pension age is now 66 for people born on or after 6 April 1960, 67 for those born on or after 6 April 1969, and 68 for those born on or after 6 April 1978. Taking this into account it seems unlikely that the Government would allow a situation where people were prevented from working once they turned 65 yet were not allowed to draw a pension until 68.

Furthermore, in light of the comments from the judge in the Heyday case, it is unlikely the Government will want to provoke a further legal challenge as a result of clinging to a Default Retirement Age of 65.

The Government may decide to take a middle ground and simply increase the current Default Retirement Age from 65 to a higher age, say 68 or 70, perhaps incorporating a further review date in a few years. If this occurs then employers will be able to continue to utilise their current retirement procedures (albeit with slightly older employees).

However, many Government ministers have made comments about the changing demographics in Britain and the need of the law to reflect modern society and some have even gone so far as to say that a Default Retirement Age of 65 is arbitrary. This begs the question of what makes a Default Retirement Age of 68 or 70 any more arbitrary than 65.

Abolishing the Default Retirement Age and allowing employees to work indefinitely is likely to be met with opposition from employers who may not want to be required to employ an increasingly ageing workforce without the opportunity to introduce “new blood” into their organisation. Many employers would also not relish the prospect of having to dismiss someone who has had a long and successful career (but who refuses to retire) on capability grounds.

Whatever avenue the Government decides to take it seems that they will meet opposition and, whilst at this point in time they may choose the middle ground of increasing the Default Retirement Age, given the current trend in Britain towards an aging population who are staying in relatively good health, it seems that, in the long term, having any standard Default Retirement Age will be difficult to justify.

For more information, please contact our Employment & HR team.

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