Phasing out the default retirement ageThursday, January 13th, 2011
As expected, the Department for Business, Innovation and Skills (BIS) confirmed on 13 January that default retirement age (DRA) will be abolished completely in three stages during 2011:
- from 6 April 2011, employers will not be able to issue any notifications for compulsory retirement using the “DRA procedures” (see below)
- 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, can be compulsorily retired using the DRA procedures
- from 1 October 2011, employers will not be able to use the DRA procedures to compulsorily retire employees.
Removal of the default retirement age does not prevent employers continuing to use retirement ages if they are able to demonstrate that they are objectively justified as “a proportionate means of achieving a legitimate aim”. Examples of jobs where retirement ages are likely to be retained, given in the BIS announcement, are air traffic controllers and police officers.
Removal of the default retirement age does not mean that employers are obliged to retain older workers indefinitely. All of the statutory reasons for potentially fair dismissal apply to workers of all ages, namely capability or qualifications, conduct, redundancy, statutory duty or restriction, or some other substantial reason.
The “DRA procedures”, mentioned above, refer to the introduction, in 2006, of retirement as a potentially fair reason for dismissal, but qualified by the inclusion of a statutory obligation on employers to give six months’ notice of retirement and to consider a written application by an employee to continue in employment beyond retirement age. There was no provision, however, for an appeal to an employment tribunal against a decision by the employer to refuse a request not to retire. Removal of the default retirement age will mean that those 2006 “equality” provisions will be repealed.
The “DRA procedures” require employers to give an employee six months’ notice of retirement. The last date that an employer will be able give an employee 6 months’ notice of retirement will be 30 March, i.e. 6 months ending on 30 September. This means that any valid notifications after 30 March and before 6 April will be on a ‘short notice’ basis (i.e. less than six months). The current DRA provisions do allow short notice of retirement to be given (subject to an absolute minimum notice period of two weeks), but an employee may be able to claim compensation (subject to a maximum of eight weeks pay) if given short notice. The short notice provisions will be abolished from 6 April.
Employers will, however, be able to retain a specified retirement age in the situation where employers voluntarily offer group risk insured benefits, such as income protection, life assurance, sickness and accident insurance, including private medical cover. This will allay concerns that removal of the DRA could lead to increased costs and uncertainty for businesses by, in effect, removing the cut-off point beyond which such benefits are currently no longer offered.