Legal - Retirement regulations: Retirement age heading for the horizon

The government recently launched a consultation on scrapping the default retirement age in the UK. Currently, an employer can force an employee to retire at the age of 65. Under the new plans, employers could not force an employee to retire because they had reached 65. If they do wish to retire an employee, they will need to provide a clear, objective justification setting out a legitimate aim and that having that compulsory retirement age is a proportionate means of achieving it.

For brokers, as for all employers, the immediate effect of the decision is to ensure they have proper procedures to manage the retirement process effectively.

Some employers have already taken the plunge and operate successfully without a compulsory retirement age. For the rest, there is a great deal to consider, including addressing the financial implications: this may include increased costs related to pensions and ill-health retirement, permanent health insurance schemes and possible increases in sickness absences.

Consequential changes might also need to be considered to pension schemes, redundancy schemes and benefits; also to how disability issues and the duty to make reasonable adjustments is managed, particularly because this duty is more extensive under the Equality Act due to come into force in October.

There is also a risk of increased tribunal claims from older workers who feel they have been dismissed for no good reason.

Many employers will recognise the advantages of removal of the DRA, for example the opportunity to retain skills, experience and knowledge as well as reduce the bureaucracy associated with the procedural requirements in the Age Regulations. Yet there are still many practicalities to consider and relatively little time to prepare. Effective performance management for all employees lies at the heart of this issue; if the workforce is well managed, underperformance should be addressed at all levels, whatever the age of the individual in question.

Brokers that offer clients employment practices liability cover should discuss with insureds the increased risks that this change presSave and publishents - particularly in relation to unfair dismissal and age discrimination claims - and look at what steps can be taken to introduce more robust management processes.

Retirement reform proposals
• From 6 April 2011, employers will not be able to issue any notifications for compulsory retirement usign the default retirement age procedure on the Employment Equality (Age) Regulations (2006).

• After 1 October 2011, employers will not be able to use the DRA to compulsory retire employees.

• Between 6 April and 1 October, transitional arrangements will apply. Only people who were notified before 6 April (before 1 april in practice) and whose retirement date is before 1 October can be compulsorily retired using the DRA.

Alex Lock, employment partner, Beachcroft

Source: Professional Broking – September 2010