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Default Retirement Age to be abolished

After considerably lengthy consultation, the Government have confirmed that the Default Retirement Age (‘the DRA’) will be scrapped from 6 April 2011 and completely abolished by 1 October 2011.

The position at present

The DRA was introduced in 2006. Currently the DRA allows employers to retire employees at 65 years of age provided they issue notifications for compulsory retirement within certain specified timescales in line with the DRA procedure.

The position after 1 October 2011

From 1 October 2011, employers will no longer be able to dismiss an employee just because they have reached 65 unless they can objectively justify doing so, which in many cases will be difficult to prove. For example, an employer recruiting within the emergency services will be justified in having a retirement age as such a service requires a significant level of physical fitness.

When the DRA was introduced in 2006, it was not intended to be subject to initial consultation and review until 2011. This review date was brought forward due to the economic climate and the changes this has brought with it. In addition to this, the Government consider that people are living longer and should therefore be given the right to work longer if this is something they wish to do.

Default provisions

Between 6 April 2011 and 1 October 2011, only employees notified before 6 April 2011 and whose retirement date is before 1 October 2011, can be compulsorily retired using the DRA procedures. This effectively means that after 6 April 2011, if procedures have not already been commenced, employers will not be able to compulsorily retire employees without objective justification for doing so.

Implications for Employers

Employers have expressed concerns that older employees may cost the business more in respect of insured benefits i.e. life assurance and private medical cover, beyond the normal retirement age. The Government have responded by stating that an exception will be introduced to the age discrimination rules so that employers do not suffer a detriment in this respect, however this has not been confirmed yet.

Effectively, employees now have the choice to work as long as they want to. Employers can no longer simply rely on an employee reaching 65 for retirement to occur. This has the potential of affecting succession planning in an employer’s business. Employers are therefore under more pressure than ever to introduce policies and procedures that deal with the workforce generally such as work force planning and formal performance management procedures.

Date: 20.02.11

For more information on the scrapping of the default retirement age please contact Jane Sinnamon (jane.sinnamon@collingwoodlegal.com.)

The information given in this article is up to date at the time of preparation. However, Collingwood Legal can accept no liability or responsibility for any loss incurred as a consequence of actions taken based on this report. We would recommend that you take legal advice. We would be happy to help.

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