LEGAL UPDATE The abolition of the default retirement age

Currently, there is a default retirement age (DRA) of 65 which means employers can force their staff to retire at that age without fear of reprisals, provided they follow the statutory retirement procedure.  However, with effect from October this year (2011), the DRA of 65 will be abolished, subject to transitional provisions and there will be no DRA.  So what does this mean for employers? 

Well the first important thing to note is that it will still be possible to retire employees, but such retirement will have to be justified under the provisions of the Equality Act 2010 (EqA 2010).  Between 6 April 2011 and 1 October 2011 the transitional provisions will apply and therefore employees who have already been notified of their retirement in compliance with the statutory notification procedures prior to 6 April 2011 and whose retirement date falls before 1 October will not be able to bring claims under the EqA.  Otherwise, such retirement will be discriminatory unless it can be justified.

The last date for issuing a notice of dismissal for retirement under the current statutory retirement procedure is 5 April 2011; the last effective date of termination for such dismissals is 30 September 2011.  The short notice provisions, which currently enable an employer to give less notice than six months of intended retirement (although employees can be awarded compensation of up to 8 weeks’ pay in these circumstances), will be abolished from 6 April 2011 and therefore employers who wish to avoid these changes (and are able to do so) will need to act quickly. 

The second important point to note is that retirement dismissals may, from 1 October 2011,  be deemed discriminatory at any age.  Employers will need to think carefully about setting default retirement ages even if these are considerably higher than 65.  Indeed, many employers may decide not to keep default retirement ages but to consider each individual on a case by case basis.  Even then, however, any dismissal will need to be justified which will entail the employer identifying a legitimate aim being pursued and showing that the means used to pursue it are proportionate.

Significantly, as the current retirement framework is being abolished and there is nothing to replace it, many employers may well become fearful of discussing retirement with their employees at all for fear of being found to have discriminated against them.  Employers may well feel that they can have such discussions with their employees on a “without prejudice” basis but they will be mistaken.  In order to be “without prejudice” (i.e. non-disclosable in tribunal or court proceedings), negotiations must be between parties who are currently in dispute.  Therefore an employer who simply approaches a current member of staff to have a discussion about possible retirement will not be able to rely upon the without prejudice rule.

So what can employers do to ensure that they can still retire their employees on occasions whereby such retirement is justified and proportionate?

  1. Build open questions into an annual appraisal system which should be asked to all employees.  These questions should deal with the employee’s current, short term and longer term plans at work.
  2. Regularly appraise and performance manage all employees so that older people can be fairly retired if they become incapable of doing their job.  However, employers must also remember the potential for disability discrimination claims from older people. Many older people may have a disability related to their age, and in such cases reasonable adjustments will still need to be considered. 
  3. If the employer wishes to retain a retirement age, then the reasons and justifications for that retirement age should be regularly reviewed and explained to staff.  The employer must then ensure that it follows a fair procedure when it implements the retirement of employees who have reached that age.  The employer should start the process long before the employee’s contractual notice period to give ample time for consultation, although if the employer has a legitimate aim which is proportionate, it is hard to see what warning and consultation could add.

 Examples of legitimate aims would be:

  1.  Workforce planning
  2. Facilitating the recruitment and retention of younger employees
  3. Retaining older employees’ dignity without having to force them to go through capability procedures
  4. Avoiding adverse impact on pensions and benefits

If circumstances permit, the employer should give consideration to any request by the employee to stay working beyond the retirement age.  The duty to consider provision is being abolished, but it will remain in the ACAS Code.

Ultimately, employers who wish to retire their employees will need to be mindful of the current provisions relating to unfair dismissal as well as those relating to age and disability discrimination.  If they do so, and if they have properly thought out procedures with carefully considered and justifiable retirement ages they should still be able to retire their employees.  Furthermore, it must always be remembered that a significant number of people will wish to retire and will be more than happy to do so of their own accord without any prompting from their employers!

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About Belinda Lester
I am the managing director and founder of Lionshead Law a specialist employment law and HR consultancy company.

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