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The new retirement regime

Employment Law & HR
BG Purple

The Government has confirmed it will commence phasing out the default retirement age (DRA) from 6 April 2011.

Despite calls from business organisations for the government to consider delaying the abolition of the DRA, the coalition has pressed ahead and confirmed the original timetable with full abolition from 1 October 2011.

Employers will still be able to operate their own contractual retirement ages, provided they can be objectively justified as a proportionate means of achieving a legitimate aim. This issue was recently considered in a case involving a law firm. In this case, it was decided that the employer could justify a forced retiral, as its purpose was to create opportunities for people to progress within the partnership.

We are still waiting for draft regulations to spell out how the new scheme will work. If past experience is anything to go by, the regulations may raise as many questions as they answer.

However some comfort can be taken from the government’s promise that the regulations will contain an exemption to the principle of equal treatment on the grounds of age, for group risk insured benefits provided by employers. The policy makers clearly understand that insured benefits are often much more expensive for an older workforce, and to avoid these costs employers might well simply remove these benefits for the entire workforce. Whether the employer could do that lawfully however, is another matter. It would depend on the employees’ contracts.

We anticipate that many employers will turn their minds over the next few months to whether to put in place their own retirement age, and the steps they will have to take.

It’s easy to predict where the clashes of interest will arise. On the one hand many employees will welcome the right to work as long as possible to build up their pension entitlements. Many employers, however, see retirement as a painless way of moving on less productive workers and replacing them with younger, more productive staff. And the other nationwide policy consideration is that there are a record one million plus young people without work. Any government of any hue has to be concerned at the growth of mass youth unemployment.

So how will all this play out? The short answer is that no one knows yet. Some of the answers will come when the regulations are published, but the real tests will arise when cases of enforced retirement reach the tribunals and appeal courts, and that will take until next year at the earliest.

The good news, however, is that we are on the case, and will be keeping LAWmail readers up speed as this story develops.

We are also planning a series of 90 minute briefings for Inverness, Aberdeen, Dundee, Edinburgh and Glasgow for late February, early March to look at this issue, and the amendments to the rights to request flexible working. Full details will be available next week.

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