Default Retirement Age Abolished

The default retirement age will be abolished from 1 October 2011.  This means that the last day employees can be compulsorily retired because they have reached the age of 65 is 30 September, so the last day to provide the required 6 months’ notice will be 30 March 2011.  Between then and 6 April the short notice provision under the DRA provisions may be used, under which an employee could claim compensation of up to 8 weeks’ pay.

Acas has produced a flow chart  showing the transitional arrangements, and guidance for employers, since no statutory code of practice on how to conduct retirement discussions will be produced.

The Government feels the rules must change as people are living longer, healthier lives.  The change will not mean that individuals can no longer retire at 65 unless that retirement can be objectively justified, and should be managed either by workplace discussions about the preference of the employee, or by formal performance management/capability procedures. There will be a limited number of occasions where retirements are essential (e.g. for health and safety reasons).

There was a concern that employers would stop offering group risk insured benefits (e.g. income protection, life assurance, sickness and accident insurance, and private medical cover benefits) if it became too expensive to pay the premiums due to an ageing workforce.  An exemption will be introduced so that the regulations will permit such benefits to be withdrawn for employees aged 65 and above, and this will rise in line with the State Pension Age.

See the Hardwick HR Blog for comment on this issue.