The government has published a consultation document setting out its proposals to phase out both the default retirement age ("DRA") of 65 and the statutory retirement procedures. They are proposing to abolish the DRA on 1 October 2011, with transitional arrangements commencing on 6 April 2011. The consultation closes on 21 October 2010.
The government intends to abolish the DRA as follows:
6 April 2011: Transitional arrangements to phase out the DRA and all associated statutory retirement procedures (including the "duty to consider" and "right to request" procedures) will begin. No new notifications of retirement under the DRA can be issued by employers after this date - this is crucial to note.
1 October 2011: The DRA and the statutory retirement procedures will be abolished.
There will be transitional arrangements during the period from 6 April 2011 to 1 October 2011.
Where an employer has given notice of retirement under the DRA using the statutory retirement procedures before 6 April 2011 and the:
- intended date of retirement is before 1 October 2011: the DRA will continue to apply so long as you continue to follow the statutory retirement procedures.
- intended date of retirement is after 1 October 2011: the DRA will no longer apply. You will need to be able to objectively justify any retirement taking effect after 1 October 2011.
If you give notice of retirement after 6 April 2011, you can no longer rely on the DRA. This is because the minimum 6 months' notice would expire after 1 October 2011 and the short notice provisions allowing less than 6 months' notice will have been repealed. You will need to be able to objectively justify any retirement, if relying on your own contractual retirement age, or will need to rely upon one of the other potentially fair reasons for dismissal.
Contractual retirement ages
If giving notice after 6 April 2011, you will still be able to operate your own compulsory retirement age, providing that you can objectively justify it as a proportionate means of achieving a legitimate aim.
The consultation document seeks views on the following issues:
- Do you agree that the statutory retirement procedures should also be removed and do you have any concerns about how these laws would operate in the absence of these procedures?
- What steps should the government take to encourage employers and employees to continue to have constructive discussions on retirement planning and alternatives to retirement after the statutory retirement procedures which prompted such discussions have been abolished?
- What are your views on two potential negative consequences of removing the DRA as follows:
- Insured benefits: To what extent will the removal of the DRA impact negatively on the current and future provision of group insured benefits such as life insurance, medical cover, permanent health insurance schemes and critical illness cover?
- Employee share plans: It is common for retiring employees to be classified as "good leavers" under such schemes and employees who resign to be classified as "bad leavers". To what extent will the removal of the DRA create difficulties in this respect?
- Do the proposed transitional arrangements strike the right balance between the policy aim of quickly phasing out the DRA and the needs of employers to have time to adapt to the changes?
- Would it assist employers and individuals if the government issued further guidance or a more formal code of practice on handling retirement discussions?
Those wishing to make a contribution to the consultation can do so online at email@example.com. The consultation ends on 21 October 2010. The government intends to publish a response to the consultation in November 2010. It looks like those wishing to rely on the retirement procedures need to get their act together before 6 April 2011!