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Executive briefing on abolition of default retirement age

Posted on 14th March 2011
Briefing note

This article provides you with a short overview of the changes and highlights the key implications of the abolition of the default retirement age in April 2011.

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Simon Quantrill Simon
Quantrill
Managing Partner Telephone: 01473 688100

the default retirement age is being abolished

From 6 April 2011 retirement will no longer be a fair reason for dismissal, except for those retirements which can take place under the transitional provisions. The default retirement age is being abolished and the statutory retirement procedure will no longer exist. In practice, for most employers, this change means the end of compulsory retirements. It will be direct age discrimination to dismiss based on the employee's age unless the dismissal can be objectively justified which for most employers will not be easy or straightforward to establish. In most cases, therefore, retirement will become a matter of choice to take place at a time selected by the individual employee.
 
The changes are being introduced to encourage employees to stay at work beyond age 65. This is because we are living longer and need to work longer to save for retirement. In 2008 16% of the population was over 65 and it is predicted this will rise to 23% by 2033.
 
The practice of letting poorly performing employees, who are near retirement age, stay on at work until they retire will need to change. There will no longer be a cut off date of age 65 to compulsorily retire such employees. Instead people managers will need to change how they manage their older employees. Better performance management of all employees will be required and people managers will have to learn how to raise performance issues with the older employee. Simply waiting for them to retire will not be an option, unless of course you are happy to put up with an underperforming older employee who cannot be made to retire!
 
Instead of relying on dismissals for retirement you will have to show that any dismissal of an older employee was for a fair reason, including capability, redundancy, misconduct or some other substantial reason. In all cases, regardless of the employee's length of service, you will need to ensure a fair procedure was followed. Having accurate and contemporaneous documentary evidence will be essential to help minimise the risk of an employment tribunal claim or avoid having to pay more under the terms of a negotiated compromise agreement.

What are the key changes?

From 6 April 2011 the following key changes take place:
 
  • the default retirement age of 65 is abolished.
  • a retirement dismissal at any age may amount to age discrimination unless it can be objectively justified (which in most cases will not be easy).
  • retirement will no longer be a fair reason for dismissal - you will need to make it fit as a dismissal "for some other substantial reason".
  • all elements of the statutory retirement procedures will no longer exist.

Insured benefits

It will be lawful for employers to stop providing life assurance, health insurance and medical insurance to employees at or over 65. This will rise in line with the planned increase in the state pension age.

Pension schemes

The abolition of the default retirement age does not affect occupational pension schemes and does not affect the setting of a "normal retirement age" for the purposes of occupational pension schemes.

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