Life After the Abolition of the Default Retirement Age

09 August 2011

As a result of recent changes in the law, the last date on which an employer could lawfully notify an employee of a retirement dismissal using the statutory Default Retirement Age (DRA) provisions laid down by the Employment Equality (Age) Regulations 2006 was 5 April 2011. Employers can no longer dismiss an older worker on the ground of retirement unless this can be objectively justified.

Retirements Notified On or Before 5 April 2011
Under transitional provisions, retirements that were notified to employees on or before 5 April – i.e. to employees who will be 65, or will have reached the normal retirement age for your business where this is higher, before 1 October 2011 – can continue through to completion provided the DRA provisions are followed. An employee in this category will have been given a minimum of six months’ notice of retirement but no more than 12 months. If an employee who is retiring on this basis requests an extension to their period of notice of retirement, the employer can agree to this providing the extension is no more than six months and the employee retires on or before 5 October 2012. The employee’s right to request to work beyond retirement ceases on 5 January 2012.

Working Without the DRA
Abolition of the DRA does not mean that employees will never be able to retire, but that an employer cannot lawfully force an employee to retire at a set age unless the age can be objectively justified under the Equality Act 2010. If this is not possible, the employer faces the double threat of a claim for age discrimination and for unfair dismissal.

Employers therefore have two options. These are:

•    to stop retiring people and use other dismissal options where necessary; or
•    to use an Employer Justified Retirement Age (EJRA).

For a set retirement age to be objectively justified, its use must be a proportionate means of achieving a legitimate aim. This is not an easy test to pass, and businesses who do wish to have in place an EJRA are advised to seek legal advice before choosing this option. An EJRA will normally be appropriate for occupations where retirement at a particular age can be justified on health and safety grounds – for example for airline pilots or fire fighters. Employers must provide evidence that the chosen EJRA is necessary – not based merely on assumptions – and be able to demonstrate that no alternative or less discriminatory action could achieve the same result. Employers who have chosen to use an EJRA must follow a fair procedure, giving the employee adequate notice of their impending retirement and, if circumstances permit, consider any request to work beyond the EJRA as an exception to the normal policy. However, it is important to have procedures in place to ensure consistency of treatment of employees who request to stay on.

Older employees can still retire voluntarily at a time of their choosing and draw any occupational pension to which they are entitled under the rules of the scheme. If an employee has given formal notice that they wish to retire, the employer is under no obligation to permit them to withdraw their notice should they change their mind. If, however, an employee has only told their employer that they plan to retire, they can change their mind before formal notice is given.

Great care must be taken if an older employee is performing badly. Procedures for dealing with performance issues must be fair and applied consistently across all age groups. To avoid a claim of unfair dismissal, any dismissal must be for one of the potentially fair reasons for dismissal under the Employment Rights Act 1996. Care must also be taken that any decisions taken by the employer do not discriminate against an employee who has a condition that constitutes a disability under the Equality Act. In such cases, the employer has a duty to make reasonable adjustments to remove any barriers to the employee’s performance.

Group risk insured benefits are exempt from the principle of equal treatment on the grounds of age, so employers who provide such benefits can cease to provide or offer them to employees aged 65 and above, even if they continue to work beyond that age. The age at which group risk insured benefits can be withdrawn will increase in line with increases in the State Pension Age.

Whilst the abolition of the DRA gives employees greater choice and flexibility over when to retire, the move has been criticised as having a negative impact on an employer’s ability to plan workforce requirements to meet future business needs.

The Advisory, Conciliation and Arbitration Service has published guidance for employers, entitled ‘Working Without the Default Retirement Age’, which contains useful advice on a possible framework for workplace discussions that will help identify an employee’s future aims, and gives examples of ways of raising the issue of retirement without asking questions that could be seen as discriminatory. The guidance can be found at http://www.acas.org.uk/index.aspx?articleid=3203.

For more information on this subject or any other legal matter,
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