The government has published its response to the consultation on phasing out the default retirement age, and confirmed that the proposals will be implemented from 6 April 2011.
In the foreword, the government emphasised that ‘these changes do not mean that individuals can no longer retire at 65 – simply that the timing of that retirement becomes a matter of choice rather than compulsion’.
At present, employers can retire employees aged 65 or over without breaching the age equality laws – which are now in the Equality Act 2010. The legislation provides a set procedure to be followed. This procedure includes giving the employee six months’ notice and that the employer must consider any request the employee makes to continue employment.
Under the new legislation to be made, employers will risk a discrimination claim if they dismiss an employee because of his age – directly or indirectly – unless they can objectively justify it as a ‘proportionate means of achieving a legitimate aim’.
The government intends to adopt a ‘phasing out’ plan to complete retirements already in progress. A transitional period will run from 6 April 2011 to 1 October 2011, during which employers cannot issue new notifications of retirement under the default retirement age. From 1 October 2011, retirement using the default retirement age exemption (without objective justification) will end.
Addressing concerns about additional cost and availability of seeking appropriate insurance, the government states that it intends to introduce a specific exemption in relation to group risk insured benefits. This will allow certain benefits to be withdrawn for employees aged 65 or over, and will rise in line with the state pension age. The government does not think that the abolition of the default retirement age will affect occupational pension schemes or the setting of a ‘normal retirement age’ for the purposes of occupational pension schemes.
The government has indicated that regulatory guidance will be published shortly.