News

30 July 2010

Proposal to scrap the Default Retirement Age

The Coalition Government’s recent budget announced that the Default Retirement Age (DRA) would be phased out from April 2011 (less than 5 years after it was introduced). Employers can currently make staff over the DRA (65 years old), retire, regardless of their circumstances or abilities. With people living longer and healthier lives, this is set to change.

The Government’s proposals for consultation were published yesterday, and set out a six-month transitional period, starting in April 2011, for the removal of the DRA. Under these proposals, the DRA will be entirely phased out by October 2011. It is proposed that between 1 April and 1 October 2011, only people notified before 1 April, and whose retirement date is before 1 October, can be compulsorily retired using the DRA.

The Coalition are trying to encourage people to work for longer, given the demographic change that the nation is seeing. Further measures suggested include reviewing when the state pension age should increase to 66, and re-establishing the link between earnings and basic state pensions.

These measures are intended to provide more flexibility to staff who are willing and able to continue in their roles past the age of 65.

The proposals also offer benefits to Employers. The administrative burden of following the statutory retirement procedures will no longer be a concern. It will also no longer be necessary to keep the ‘right to request’ working beyond retirement age process, or to give Employees a minimum of 6 months notice for retirement.

It will still be possible for Employers to have a compulsory retirement age for their workforce. Employers must be able to objectively justify this. A commonly used example is that of air traffic controllers or police officers. Employers should be wary of introducing compulsory retirement ages without strong justification, as they may find themselves open to claims for discrimination on the grounds of age.

The Government’s consultation is seeking to find information on the following:

1. Can the Government provide additional support for individuals and employers in managing without the DRA and Statutory Retirement Procedure?
2. What future guidance could be made available to Employers and individuals?
3. Should there be a more formal code of practice for handling retirement?
4. Could there be unintended consequences for insured benefits and employee share plans?

The consultation is open until 21 October 2010.

Please note that this information is provided for general knowledge only and therefore specific advice should be sought for individual cases.

For further information please contact: or