Planning for retirement

The Employment Equality (Age) Regulations were introduced in 2006 by the government to outlaw discrimination on the grounds of age in the employment context. The regulations contained provisions relating to retirement and a default retirement age; requiring an employee to retire at a given age is discriminatory but the regulations permit this with a default retirement age of 65.

This provision was challenged in the Heyday case, initially on the basis that there should be no default retirement age at all. That was considered by the European Court of Justice, which decided that a default retirement age did not offend European law in principle. The case went back to the High Court for consideration regarding specifically whether or not the age of 65 was in fact justified, which it held. The fact that the government announced immediately before the case that it would review the default retirement age in 2010 is likely to have been highly persuasive in that decision, as the judge commented he could not see it remaining at 65.

For brokers, as employers, the immediate effect of the decision is to provide certainty to their businesses. Retirements recently carried out and those planned for the next 12 to 24 months will not be open to challenge, provided the retirement provisions are complied with and the employee is 65 or older.

This means that proper succession planning can be carried out and that career development opportunities are opened for those in younger age groups, without the uncertainty of lengthy and expensive legal challenges on the basis of age discrimination. Furthermore, especially given the current difficult economic climate, the cost of providing employment benefits and redundancy packages to employees over the age of 65 can be prohibitive for smaller and medium-sized businesses.

Brokers need to ensure that they have proper procedures in place to manage the retirement process effectively. The regulations require that an employee approaching retirement is given six to 12 months' written notice of the employer's intention to retire them and of their right to request to continue working. Failing to comply with the retirement process will mean that brokers, as employers, are exposed to the risk of a claim of unfair dismissal.

For the future, the outlook is less certain for employers. There will be a review of the default retirement age in 2010 and, against the background of an ageing population, the cost of pension provision and healthcare, as well as the expectation we have of working longer, the days of retirement at 65 are likely to be numbered. The issue will be where the line is to be drawn next.