On 17 February the Government published draft regulations on the abolition of the default retirement age. These contained rather odd transitional provisions, which did not reflect its previous announced policy. Revised regulations were then published on 1 March removing the anomaly. These are subject to the affirmative resolution procedure, with the hope that they will be approved by Parliament in time for the implementation date of 6 April.
The last date for giving notice of intention to retire an employee under the statutory regime remains 5 April 2011.
The statutory regime allows for a maximum of 12 months' notice, so that a notice given prior to 6 April 2011 could expire after 30 September 2011. The original announcement (summarised here) suggested that all retirements had to take place before 1 October 2011, otherwise they would be unlawful (if not justified). This has changed.
The first set of draft regulations provided that the current regime (where retirement does not need to be justified to be lawful) would apply to retirement dates on or after 1 October 2011 where notice was given prior to 6 April 2011, but only for employees who actually turn 65 (or a higher normal retirement age) in the period from 6 April 2011 to 30 September 2011. Those who turned 65 before 6 April 2011 but continued to work past this age (eg, as a result of an employer granting a statutory request to continue working) could not be retired under the transitional provisions and therefore their retirement on or after 6 April would need to be justified.
Conflicting reports were received from BIS as to whether this was a mistake. On 1 March a second set of regulations was produced for Parliamentary approval, removing the anomaly. Under these regulations:
- the old regime will apply to retirements of employees who are 65 on or before 30 September 2011 provided the employer has given notice of intention to retire on or before 5 April 2011.
- There is some debate as to the latest date such notice could expire; the usual rule is that the day notice is given is excluded from the time period, so the maximum notice of 12 months would expire on 5 April 2012.
- Such an employee could still make a request to continue working, but would need to do so on or before 4 January 2012 (as more than three months' notice is required).
- Following such a request an employer could agree to delay the retirement date by six months or less and still rely on the old regime. This could mean the latest retirements under the old regime are on 5 October 2012. If a longer or indefinite extension is agreed, any subsequent retirement would need to be justified.
As expected the draft regulations contain an exemption allowing employers to restrict group insurance benefits provided by an insurance/financial services provider to employees under 65 or any higher state pension age.
Employers will need to check whether employees have any contractual rights to the continuation of such benefits past 65 before using this exemption.
Employers who require over-65 year olds to top-up the standard employer contribution to achieve cover may also need to reconsider their approach, as the exemption does not cover this. Such an approach would need to be justified.
Identify any employees who are already 65 (or a higher normal retirement age) or will reach that age before 30 September 2011; decide whether you wish to retire them under the old regime and if so ensure notice of the intended retirement date is given on or before 5 April 2011.
Review your insurance benefit schemes and consider whether changes may be needed to other benefits and policies, such as enhanced redundancy schemes and share scheme plans.
Review whether any employment contracts contain compulsory retirement ages.
Consider your approach under the new regime:
- retain a retirement age and seek to justify it (ie, show that it is a proportionate means of achieving a legitimate aim). While a legitimate aim may be relatively easy to establish (such as workforce planning), it is likely to be difficult to show that a specific retirement age is a proportionate means of achieving it. Employers adopting this approach will need to start work now on assembling hard evidence to support their chosen age – as Acas state, "assertions alone will not be enough". Employers operating a justified retirement age will also need to adopt a fair procedure when retiring an employee, which is likely to include considering any request to continue working. (Note that the Supreme Court has recently given permission to appeal the Court of Appeal ruling on justification of a partnership retirement age in Seldon v Clarkson, Wright & Jakes - one to watch.)
- abandon compulsory retirement. Older employees with performance issues will have to be managed in the same way as younger ones, rather than simply avoiding the issue until the employee retires. Managers may need refresher training in performance management.
- the use of a maximum recruitment age will also need to be justified.