Default retirement age to be axed

30 July 2010

The default retirement age of 65 could be scrapped from October next year under proposals set out by the government.

If plans are agreed, employers would no longer be allowed to dismiss staff when they reach 65.

Under the current rule, set up in 2006, an employer must give six months notice before forcing someone to retire because of age, and they do not have to pay them any financial compensation.

The proposals mean that no forced retirement notices could be issued after 6 April 2011 - six months before the October change.

Plans to change the retirement law were included in the government’s coalition agreement to try and ease the strain on public finances, as people are now living longer.

The measure, along with the proposed increase in the age at which people receive their state pension, is hoped to encourage people to work for longer and could potentially inject billions of pounds into the economy.

Employment relations minister Edward Davey says: "Older workers bring with them a wealth of talent and experience as employees and entrepreneurs. They have a vital contribution to make to our economic recovery and long-term prosperity."

Activists have welcomed the proposals as a triumph against ageism.

Rachel Krys, campaign director of the Employers Forum on Age, comments: "The default retirement age is a dated and unfair system and its removal is simply common sense. With rising life expectancies, and people staying fitter for longer, it is archaic to assume that someone’s age is an indicator of the contribution they can make to the workplace."

Ian Naismith, head of pensions market development at Scottish Widows, agrees that it is ‘not realistic’ to force people to retire at a certain age as many of us will have to work longer to secure a comfortable retirement. He advises workers to build up a pension pot of around 12% of income each month to ensure a decent pension in retirement.

The consultation is open until 21 October, but some businesses are worried about the short timescale the government is working with and other potential problems.

John Cridland, deputy director-general of the Confederation of British Industry, warns: "Scrapping the default retirement age will leave a vacuum, and raise a large number of complex legal and employment questions, which the government has not yet addressed. This will create uncertainty among employers and staff and there will need to be more than a code of practice to address these practical issues."

Despite the government plans, it is believed that employers could still operate their own compulsory retirement age on certain grounds.


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