UK: Retirement - Government confirms abolition of default retirement age

The Government has published its response to the consultation on the abolition of the default retirement age.  It is going ahead with the original timetable: the last date for compulsorily retiring an employee under the old regime is 30 September 2011 and the last date for giving notice of intention to retire is 5 April 2011.  From 1 October 2011 compulsory retirement will need to be objectively justified. Under the current regime employers can compulsorily retire an employee without risk of an age discrimination or unfair dismissal claim at or after a normal retirement age of 65 or above, or at or after 65 if there is no normal retirement age. To do so, the employer must give between six and twelve months' notice of its intention to retire the employee and follow the statutory procedure for considering any request to carry on working.

If less than six months' notice is given, the employee can claim up to eight weeks' compensation. The employer also loses the benefit of the presumption that the dismissal is a retirement, so there is a slight risk of a ruling that the dismissal was for some other reason. But assuming the dismissal is held to be for retirement and the rest of the statutory procedure is followed (including the minimum two weeks' notice), the retirement will be lawful.

The Government has confirmed that the last date on which an employer can compulsorily retire an employee with the protections outlined above is 30 September 2011. The last date notice of retirement can be given under the statutory procedure is 5 April 2011.

In order to achieve the six months' notice required under the statutory procedure, notice of retirement on 30 September 2011 should be given no later than 30 March 2011. Notices between 31 March and 5 April 2011 to expire on or before 30 September 2011 could give rise to a claim for compensation and a challenge to the real reason for dismissal as set out above.

There are two options for employers after 1 October 2011:

• retain a retirement age and seek to justify it (ie, show that it is a proportionate means of achieving a legitimate aim). While a legitimate aim may be relatively easy to establish (such as workforce planning), it is likely to be difficult to show that a specific retirement age is a proportionate means of achieving it. Employers adopting this approach will need to start work now on assembling hard evidence to support their chosen age – as Acas state, "assertions alone will not be enough". Employers operating a justified retirement age will also need to adopt a fair procedure when retiring an employee, which is likely to include considering any request to continue working.
• abandon compulsory retirement. Older employees with performance issues will have to be managed in the same way as younger ones, rather than simply avoiding the issue until the employee retires. Managers may need refresher training in performance management.

The use of a maximum recruitment age will also need to be justified.

There is some good news for employers: the Government is planning to introduce a specific exemption allowing employers not to provide group risk insured benefits (such as income protection, life insurance, sickness insurance, private medical cover) to employees over 65 (to increase in line with the state pension age).

Draft regulations are not yet available, but Acas have produced (non-statutory) guidance on working without the default retirement age.

Please get in touch with your usual HS contact if you would like to discuss the options set out above, including the possibility of justifying a retirement age. If you decide that you will have to do without a retirement age, you should review your performance management and appraisal processes, possibly building in a discussion about future career plans for all employees (as recommended by the Acas guidance). You should also consider whether changes may be needed to other benefits and policies, such as enhanced redundancy schemes and share scheme plans.