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Managing retirement in the absence of a default retirement age

We are increasingly discussing with clients the issue of the absence of any default retirement age.  After its removal in April 2011 a dismissal based on a person’s age is unlawful direct age discrimination under the Equality Act, unless an employer can objectively justify it or establish that being below that age is an occupational requirement.  The principle behind the removal of the default retirement age relates to the fact that all the statistics now show people are living longer and need to work longer to save for retirement.  Combined with the absence of proper pension provision, the Government decided to remove the barrier of the default retirement age to assist the workforce in bridging any income gap.

Unfortunately what has happened is that employers are now very uncertain of how they can retire people.  The legal situation is not particularly helpful.  The Courts continue to recognise that an employer may have legitimate aims to pursue in seeking to retire members of its workforce, but they will want to be satisfied that the age that the employer has chosen is appropriate and necessary.

There is no longer a fail safe age at which to retire employees.  What is clear is that 65 will no longer cut it in an employment contract and many employers have chosen to remove retirement ages completely.  The problem with this process is that you are then left having to performance manage out an older employee when they are no longer able to do the job.  This can often lead to an undignified end to a very long and fruitful career.

Compulsory retirement can be objectively justified if it is “a proportionate means of achieving a legitimate aim.”  Many of the cases in this area are European rather than domestic, but examples of legitimate aims have been:

  • Workforce planning
  • Contributing towards a pleasant workplace and protecting the dignity of older workers by not requiring them to undergo performance management
  • Promoting the recruitment and retention of younger employees

What is clear is that any legitimate age must be relevant to the employer’s circumstances.  As a result it will be very difficult to give hard and fast advice on the rules to be followed, but a discussion and assessment of what the job entails.

What employers need to do is:

  • If you have a fixed retirement age of 65 in your contracts, it needs to be removed unless you can justify it (likely to be very difficult).
  • If you are retaining a fixed retirement age or revising it upwards, consider what objective justification there is for the age you choose.  Consider what legitimate aims needs to be met by your business and whether this change to the retirement age is the only way of meeting this aim.

In short employers need to have regular and frank discussions with their employees, probably best achieved through the appraisal process.  This way employers will be aware of their employees’ plans and will have accurate records of their performance within the organisation.