End of the Line for the Default Retirement Age

End of the Line for the Default Retirement AgeThe Government has today confirmed that it will remove the Default Retirement Age (DRA) so that people have more choice when to stop working. As well as benefiting individuals, the freedom to work for longer will provide a boost to the UK economy.

Ministers have decided to proceed with their plan to phase out the DRA between 6th April and 1st October 2011. The Government’s written response to its recent consultation on the issue, and new guidance to help businesses adapt to the removal of the regulation, have been published today.

Currently the Default Retirement Age enables employers to make staff retire at 65 regardless of their circumstances, but the Government feels the rules must change as people are living longer, healthier lives.

Employment Relations Minister Edward Davey said:

“Retirement should be a matter of choice rather than compulsion – people deserve the freedom to work for as long as they want and are able to do so.”

“Older workers can play an incredibly important role in the workplace and it is high time we ended this outdated form of age discrimination.”

“We are putting in place support to help business adapt to the change, but it is important to remember that about two-thirds of employers already operate without fixed retirement ages – and many of those with retirement ages already offer flexibility for workers to work longer.”

Minister of State for Pensions Steve Webb said:

“It’s right that we put an end to this outdated form of discrimination where employers can force people out of a job simply because of their age. We will work with employers to ensure that the transition is fair and well understood.”

The Government will help employers adapt to the change – it:

  • Has worked with Acas (Advisory, Conciliation and Arbitration Service) on new comprehensive guidance that has been published today.
  • Has also published today new Age Positive guidance setting out how many employers manage without fixed retirement ages and benefit from the employment and retention of older workers.
  • Will remove the administrative burden of statutory retirement procedures. With the DRA gone there is no reason to keep employees ‘right to request’ working beyond retirement or for employers to give them a minimum of six months notice of retirement.
  • Will introduce an exception so that there are not unintended consequences for employers that currently voluntarily offer group risk insured benefits (income protection, life assurance, sickness and accident insurance, including private medical cover). There had been concern that removal of the DRA could lead to increased costs and uncertainty for businesses by in effect removing the cut-off point beyond which such benefits are currently no longer offered.

Acas Chief Executive John Taylor said:

“We stand ready to assist any employers who have been operating with a retirement age adapt to the change in the law. Acas has extensive experience of helping organisations understand how they can comply with Government legislation. Our guidance will be available on the Acas website.”

The change means that from 6 April 2011, employers will not be able to issue any notifications for compulsory retirement using the DRA procedure. Between 6 April and 1 October, only people who were notified before 6 April, and whose retirement date is before 1 October can be compulsorily retired using the Default Retirement Age. After 1 October, employers will not be able to use the DRA to compulsorily retire employees.

Although the Government is removing the DRA, it will still be possible for individual employers to operate a compulsory retirement age, provided that they can objectively justify it. Examples could include air traffic controllers and police officers.

The deregulatory measure is one of the steps the Government is taking to help encourage people to work for longer against the backdrop of demographic change. Others include raising the state pension age to 66 faster than currently scheduled and re-establishing the link between earnings and the basic state pension.

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For other small business advice on the subject take a look at the Age Discrimination Act 2006.

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