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The Abolition of the Default Retirement Age of 65

 

Currently, it remains lawful for employers to compel an employee aged 65 or more to retire.  To achieve a lawful retirement the employer must follow the statutory retirement procedure.

 

When will it be abolished?

The Default Retirement Age of 65 ("the DRA") will be abolished on 1 October 2011.  Dismissals occurring on or after 1 October 2011 which are "age-related" will have to be either objectively justified, or meet the ‘fair' dismissal tests.

To comply with the compulsory retirement process before the DRA is abolished:

  1. notification of retirement must be issued no later than 5 April 2011 (and ideally no later than 30 March); and
  2. the retirement date should be no later than 30 September 2011; and
  3. the requirements of the statutory retirement procedure should be followed in full.

 

What are the effects of the change?

After 5 April 2011, it will no longer be possible to retire employees automatically on or after they reach 65 years of age.  Instead, the employer will be required to provide objective justification for the retirement of any employee.  Alternatively, it will be necessary to dismiss with a "fair reason" and after a "fair process", in the same way that it is necessary to dismiss any other employee with continuous employment.  

 

Objective Justification?

To establish objective justification of any retirement age, it will be necessary to show the employer has a legitimate aim and that the method of implementing that aim is proportionate. 

This legal framework will be developed by case law but until then, a legitimate aim may include matters such as the recruitment, retention or promotion of younger employees, maintaining levels of service, training requirements or health and safety issues.  Any such aim may be regarded as legitimate, only if it is supported by objective evidence and can be specifically measured.  Clearly it will be necessary for the aim to be very substantially more than the employers own view or aspirations and it will also be necessary to show that the operation of any compulsory retirement age is a proportionate way of achieving the legitimate aim.

In assessing whether or not the retirement is proportionate, the employer should be able to demonstrate there was no other appropriate way of achieving the legitimate aim with less discriminatory effect.  Accordingly, it will be necessary to demonstrate why a particular retirement age was selected, what other means of individual assessment were or should have been considered and the level of consistency with which the selected retirement age is observed.

The alternative is to dismiss for one or more of the five ‘fair reasons', which will also require a ‘fair' process to be followed. 

 

What steps should I take?

You need to consider whether or not to have a fixed retirement age and if you already have one, whether this should be revised or removed.

If you wish to have a fixed retirement age, it will first be necessary to consider how it may be objectively justified.  In addition to the review of any employment documentation or policies which cover the issue of retirement, you should:

  • Identify any potential retirements under the present statutory process (namely those who will be aged 65 or more on or before 30 September 2011);
  • ensure that notice of any retirements under the present statutory process is given by 30 March 2011;
  • review any retirement proposed to take effect after 30 September 2011;
  • ensure any share scheme or long term incentive plan does not refer to any compulsory retirement age; and
  • review the staff appraisal system, such that it includes discussing with each employee and not only those approaching the prospect of retirement, their future aspirations and expectations.


London

Contact James Davies email james.davies@laytons.com or

Stephen Cates email stephen.cates@laytons.com or

Keith Corkan email keith.corkan@laytons.com

Guildford

Contact Tim Randles email tim.randles@laytons.com

Manchester

Keith Corkan email keith.corkan@laytons.com

Michelle Gray email michelle.gray@laytons.com

 

For PDF version of this focus sheet please click here