Friday 30th July 2010

Scrap default Retirement Age

It was announced yesterday that the new Government are planning to do away with the fixed retirement age in the UK as of October 2011. Currently, the default retirement age for men and women is 65 years, and under the Employment Equality (Age) Regulations 2006 an employee can request to work beyond his or her retirement age. Such a request does not always have to be granted (nor decision justified) and so provides opportunity for an employer to retire an employee once retirement age is reached, and without providing further compensatory benefit.

What are the Changes?

The new proposals will not allow such an opportunity for employers to do so and is likely to result in a growing aging workforce. Specifically, under the plans, no forced retirement notices can be issued after 6 April 2011- six months before the October change. Whilst, employees reaching retirement age currently may be very welcoming of such decisions to work on longer, such tight timescales will not provide many employers time to plan, forecast and strategise for such occurrences.

Implications for Organisations

Those organisations that operate in a high risk environment or can objectively justify defaulting a retirement age may do so, however may be challenged as to why this is the case. There are also potential implications on younger generations, who may now face not gaining jobs or progressing in their chosen career as quickly as anticipated. As such we may see a rise in claims of age discrimination from both spectrums of the age range.

Other key areas of concern are the impact on employee benefits – life insurance cover, medical cover – when will these end? As you will have read in my recent blogs, there is the proposal to introduce a compulsory ‘qualifying pension scheme’, NEST, where employers are required to contribute to a pension scheme for all employees from the age of 22 to state pension age – will the abandoning of the default retirement age have a knock on effect on this? Will it incur further costs and administrative work as a result?

How can we help?

Gravitate HR will continue to keep ourselves updated of the forthcoming consultations into yesterday’s Government proposals, as well as any further resolution on the impending NEST. Certainly, at this stage, we will work with you to deal with any immediate cases and to consider any implications for you and your business. This will mean that we will alter your terms and conditions of employment and retirement process and policies, which we can advise on as we learn more.

For more information, please contact us on: 0131 225 7458