Retirement – the coalition's current proposals

07/10/2010

By Nick Hobden, Partner and Head of Employment

Until now, upon an employee reaching either an employer's normal retirement age or the default retirement age of 65 (whichever is the higher), an employer has been able compulsorily to retire its employees without much fear of a claim. The Employment Equality (Age) Regulations 2006 came into force four years ago meaning that as long as employers have complied with the statutory retirement procedure, then compulsory retirement has been lawful and any claim for either unfair dismissal or age discrimination has been bound to fail. 

We have written many times about the various attempts made to challenge the current retirement regime. Heyday, the campaigning arm of Age Concern, mounted a well-publicised, if ultimately unsuccessful, attempt to overturn the retirement laws. But where Heyday failed, it would appear that the new coalition government will succeed. On 29 July 2010, the government published proposals for radical changes to the law in this area. If introduced, these changes would see the complete scrapping of the default retirement age and the statutory right compulsorily to retire employees.

Currently, it is intended that the proposed changes will be introduced over a period of six months from April to October 2011. With effect from 6 April 2011, transitional arrangements will begin to phase out the default retirement age and all associated statutory retirement procedures. No new notifications of retirement in respect of the default retirement age will be permitted. On 1 October 2011, the default retirement age and the statutory retirement procedures will be abolished in their entirety.

What is allowed?

If the changes go ahead and the following conditions are met, the dismissal is likely to be lawful (presuming that the employer continues to follow the statutory retirement procedures):

• notice of retirement is given at the default retirement age using the statutory retirement procedures before 6 April 2011 and
• the intended date of retirement is before 1 October 2011.

What is not allowed?

In the following circumstances, the existing rules permitting retirement dismissals will no longer apply. Any retirement dismissal will be open to challenge and the employer will have the very difficult job of trying to justify its decision to dismiss the employee:

• notice of retirement is given on or after 6 April 2011 and/or
• the intended date of retirement is on or after 1 October 2011.

Summary

We are still in a period of consultation regarding these proposals. It is fair to say that the prospect of the default retirement age being abolished in its entirety is one that many in the business community are troubled by. Whether their resistance influences the eventual government policy remains to be seen. We should know some time in November. If the law is amended in line with the current proposals, employers are going to have to make swift changes to their practices and procedures in order to accommodate the new laws.

If you need advice on what you can and cannot do under the proposed laws and what (if any) steps you need to take in order to prepare your business for this change, please contact a member of the Employment team.