Consultation on phased abolition of Default Retirement Age from April 2011Wednesday, August 4th, 2010
The Employment Equality (Age) Regulations 2006, which came into force on 1 October 2006, provide for a default retirement age (DRA) of 65 that employers can rely on if they wish. The regulations make earlier retirement ages unlawful unless employers can objectively justify them. The regulations also introduced a new statutory right for individuals to be given at least six months’ notice of retirement and to request postponement of retirement beyond the age of 65 – requests which the employer must consider.
Before the current Coalition government took office, the previous government had announced that a planned review of the DRA would be brought forward from 2011 to 2010. At that time, a major research project was announced to investigate employers’ age-based practices, in particular the use of the default retirement age. The new government made it clear quickly that its intention was to abolish the DRA and, in July 2010, published three documents that examined the results of the research and reviewed employers’ policies, practices and preferences relating to age.
On 29 July, the Department for Business, Innovation and Skills (BIS) published a new consultation document that proposes complete abolition of the DRA by October 2011. This would be achieved in stages:
- from 6 April 2011, employers will not be able to issue any notifications for compulsory retirement using the DRA procedure
- between 6 April and 1 October 2011, only people who (1) were notified before 6 April, and (2) have a retirement date before 1 October, may be compulsorily retired using the DRA
- from 1 October 2010, employers will not be able to use the DRA to compulsorily retire employees and, if they wish to use retirement ages, they will have to be able to demonstrate that these are objectively justified as a proportionate means of achieving a legitimate aim.
The conditions at 2 above exclude situations where more than six months’ notice is given, resulting in a retirement date of 1 October or later. Such notifications would not be valid.
In addition, all of the associated statutory retirement procedures, as introduced by the Age Equality Regulations in 2006 would be removed, including the employer obligation to give a minimum of six months’ notice of retirement and the employee right to request to work beyond retirement age. Ending the employment of an older work would only be possible using fair dismissal procedures involving one of the statutory reasons set out in the Employment Rights Act 1996, namely capability or qualifications, conduct, redundancy, statutory obligation, or some other substantial reason.
The existing provisions do not apply to office holders, partnerships and employments governed by statutory age limits, such as commercial pilots. They will be unaffected by the proposed changes.
Views are also sought on two issues that were raised during an earlier call for evidence.
- The Age Equality Regulations require employers to review any benefits that are not being provided equally to employees of all ages. An issue continues to concern employers in this regard, namely the provision of group insured benefits, such as life assurance, medical cover, income protection schemes and critical illness cover. The cost of providing such benefits becomes increasingly expensive as employees grow older. A similar issue applies to permanent health insurance policies, which guarantee a proportion of salary until retirement. Should an exemption from equality be added to the Regulations in respect of these benefits?
- The tax rules for employee share schemes require employees leaving employment on retirement or after an age defined in the schemes rules to retain their share options. Employees who leave voluntarily, however, are generally not entitled to retain their options. If the DRA is abolished, how can employees who retire and those of a similar age who leave voluntarily be distinguished?
Views on these and other issues raised in the consultation document are sought by 21 October 2010.