Partner Article

Retirement

Removal of the Default Retirement Age

The Default Retirement Age has been removed for some time now. Therefore employers cannot compel an employee to retire at age 65.

Benefits of removing the Default Retirement Age {DRA}

The main argument for removing the DRA was allowing older people freedom of choice. Many older people enjoy their work and want to continue working beyond the state retirement age. Increasingly, older people are concerned about potential financial difficulties of surviving on a pension and therefore want to continue working for financial reasons. The DRA of 65 was seen as an arbitary bar without any reasoning behind it.

Naturally there is also the issue that people are living longer and retiring at the age of 65 leaves a long period of life without any work. As well as living longer, people are healthier and are physically able to work longer than in the past. Life expectancy is currently increasing by over two years per decade and this has a financial impact on the country. There is, quite simply, an economic advantage to have older people working, rather than being solely supported by a pension.

Despite these arguments there has not been a lot of enthusiasm for the removal of the DRA from all groups. Employers’ bodies such as CBI and the IOD have generally been negative, with their concern being the removal of the flexibility that the DRA gave to employers.

The TUC has generally been positive but has expressed concerns about the impact that this may have on older people in physically demanding jobs. It has also expressed concern about the planned increase of the age at which state pension is paid.

Justifying a retirement age after removal of the DRA

It is still possible for employers to have a compulsory retirement age, if it can be objectively justified. There are examples of Air Traffic Controllers and Police Officers as possible professions where having a retirement age could be justified. These are called; ’Employer Justified Retirement Ages’ {EJRAs}

For employers to have a compulsory retirement age they will have to show that it has a ‘legitimate aim’ and that retirement is a ‘proportionate means of achieving that aim’ For example, it might be possible to demonstrate that the retirement age is a Health & Safety issue. However, to use such an argument and employer will have to provide evidence to show that an older age is linked to Health & Safety issues, and will have to demonstrate the retirement age is a proportionate means of addressing those issues.

A cost saving alone would not be a legitimate aim, for example; an older worker has a higher salary than a younger worker and therefore there is a saving to the Company if the older worker leaves.

Rather than having a compulsory retirement age, employers could decide retirements individually. However, the employer will still have to show that any decision to retire someone is objectively justified. If an employer does want to retire someone, it will have to follow a fair procedure under existing dismissal rules. For the dismissal to be fair there will have to be a potentially fair reason - one of the five reasons set out in the Employment Rights Act 1996:

1. Capability
2. Conduct
3. Redundancy
4. Statutory Ban or
5. Some other substantial reason

Age discrimination: Law firm’s mandatory retirement age of partners was justified

Last week an Employment Tribunal brought to a conclusion a long running retirement case; Seldon ~v~ Clarkson Wright & Jakes by applying Supreme Court guidance and deciding that a law firm’s partners to step down at age 65 was justified.

Reviewing the management of older employees

Employers should review the way in which they manage older employees. There is a danger that older employees are stereotyped and employers presume that they will be less flexible and less willing to embrace change. This is certainly not true of all older employees and it is important that these stereotypical perceptions are challenged. It is a fact that older employees are more reliable and take less time off sick than younger employees.

Consider whether an employer justified retirement age is applicable

It is recommended that employers consider whether a ‘Employer Justified Retirement Age’ is applicable to any jobs within the organisation. Given that the EJRA is driven by the demands of the job, it is unlikely that there will be an EJRA that applies to all jobs within the organisation. Employers should note that it will be a rare situation where there is an EJRA that can be applied.

Educate line managers about retirement

It is vitally important that line managers understand the law relating to retirement so that they can plan their skill requirements effectively. it is also important that line managers understand how they should manage someone who is older in age and is aware of actions that could be interpreted as discriminatory.

Ensure that there are good practice procedures in place

Older employees bring a lot of benefits to the workplace and often have a great deal of experience that can be of immense value and be a significant asset to the organisation. Good practice procedures for gaining benefit from this experience could involve the inclusion of older employees in mentoring and coaching schemes. It might also be appropriate to have older employees involved in induction, training and educating less experienced or younger employees.

This was posted in Bdaily's Members' News section by Andrew Dane .