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Retirement – Who needs it?

Dateline 14 July 2009 - The government yesterday signalled the end of the default retirement age of 65 with the publication of a new document Building a Society For All Ages that the review of the 65 default retirement age is to be brought forward by a year to 2010.  This is widely seen as their attempt to adapt to the changing economic climate since the introduction of the latest retirement legislation 3 years ago.

The current age discrimination legislation, which came into force in 2006, permits employers to retire their employees when they reach the age of 65, provided they follow the prescribed procedure in retiring employees. This procedure involves the right to request to continue working beyond the intended retirement date and in such circumstances the current age discrimination legislation provides that the retirement will not amount to unlawful age discrimination or unfair dismissal.

The Government has always been committed to reviewing whether or not the default retirement age continues to be appropriate and necessary, but the date it gave for this review was 2011. Now, it has announced that the review will be brought forward by a year to 2010. In doing so, it points to the very different economic circumstances today, both for individuals and for employers, compared with those three years ago when the legislation came into force.

The Government points to the financial benefits to employees in working longer - they continue to earn for a longer period and receive an increased pension on retirement. It also states that they can continue to provide experience to business and that many employers appreciate their loyalty and maturity. However, the CBI, the business lobby organisation, is unenthusiastic about the earlier than expected review, stating that the announcement is disappointing at a time when so many businesses are under pressure. It views the default retirement age - combined with the right to request to continue working beyond retirement age - as necessary in allowing organisations to plan ahead.
Who is right?  The answer is most probably both.  It is an inescapable fact that the rapid demographic changes and the longer-term consequences of the credit crunch are forcing the Government to review (or tinker some may say) their policies to make them affordable.  The CBI rightly points out that both employers and employees need to plan.  However, it is now common in all sorts work sectors to find persons older than 65 continuing to make valuable contributions with most winding down their time at work to reduce the impact of retirement on their lives.

The default retirement age is also under scrutiny at the moment in another forum, with the High Court set to hear the Age Concern and Help the Aged legal challenge to it on 16 July. The case was referred to the European Court of Justice, which said that it could, in principle, be justified by legitimate social policy objectives. The question is whether or not the Government can meet the high standard of proof required to show such justification.

We won’t have the final judgment until the autumn. But, even if the default retirement age is ruled lawful, the Government’s earlier than expected review of the default age signals that it may be on its way out in any event. If it is, changes in the legislation would be implemented in 2011.

The author, Philip Norris is Principal Consultant and Managing Director of Norris Management Ltd.  In a long and varied career, Phil has been a Programme and Project Manager for high profile projects in the Construction and Transportation fields.  In recent years, he has provided much needed support as a management consultant to corporate and SME clients on people - the development of, the management of, team building and the employment of.