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End in Sight for the Default Retirement Age of 65

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After months of speculation, the government has now announced a consultation exercise on phasing out the default retirement age of 65 from 6 April 2011 with its eventual removal from 1 October 2011.

Retirement PartyThe Employment Equality (Age) Regulations came into force on 1 October 2006 and prohibited discrimination in employment and training on the grounds of someone’s age. Controversial from the start, was the national default retirement age (DRA) of 65. The introduction of the DRA was accompanied by a statutory "retirement procedure" whereby an employer gives notification of an individual’s proposed retirement date within 6 to 12 months of that date. An employee has the right to request working beyond retirement age and the employer has to consider that request but can force retirement without having to give reasons provided certain procedures are followed. The DRA was the subject of immediate legal challenge by Age Concern but this failed.

It’s all change now though as our new government is of the view that those who need or wish to work past 65 and are able to do so should not be denied the opportunity simply because they have reached a particular age.

The government now proposes to phase out the DRA from 6 April 2011 and retirements under the DRA will cease completely on 1 October 2011. If employers want to retain a compulsory retirement age in their organisation they will only be able to do so if they can objectively justify it. This is likely to be difficult to do for the vast majority of employers. The statutory retirement procedure will also be removed.

Following removal of the DRA, any dismissal of an individual will need to be conducted adopting a fair procedure and for one of the 5 potentially fair reasons for dismissal (namely, capability, conduct, redundancy, illegality or “some other substantial reason”- in practice quite rare).

It is important to note that the DRA applies to "employees" as defined by the Employment Rights Act 1996 and so, a number of groups will be unaffected by the removal of the DRA including those professions where there is a statutory age limit such as commercial pilots or partnerships.

The government recognises certain cases will be caught unfairly by the phasing out and eventual removal of the DRA. However, it is of the view that there is a need for legal certainty and a six month period for transitional arrangements will come into force on 6 April 2011. Employers will be unable to issue new notices of retirement using the DRA on or after 6 April 2011 and retirements that are already underway, that is, notices is issued before 6 April 2011 can continue through to completion if the date of retirement falls before 1 October 2011.

After 1 October 2011, employers will not be able to use the DRA to compulsory retire employees and, as mentioned above, if they wish to use a retirement age they will have to be able to demonstrate this is objectively justified.

We are therefore advising employers to:

consider whether they still want a compulsory retirement age and if so whether they can (if at all) objectively justify it;

  • review all the employees who are approaching retirement age and identify if those employees can be given notice of retirement in accordance with the transitional arrangement;
  • look at benefits such as pension, life assurance, permanent health insurance and private medical insurance and ascertain the likely cost of continuing those benefits for employees aged 65 and over;
  • revisit contracts of employment and handbooks and consider what amendments will need to be made to take into account the removal of the DRA.

Paul Grindley can be contacted on (0113) 399 3424 or paulgrindley@keeblehawson.co.uk.
 

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