Following the changes, employees with a contractual retirement age of 65 and who would currently expect to receive a state pension at that age will no longer receive a state pension until they reach 66 years of age. This may leave some individuals with a gap in income for that year of €12,000 approximately which they will not now receive until they reach age 66. Unless those affected have another source of income to sustain them for that "gap year" they will, no doubt, look for replacement income.

Among the possible options, some employees will want or simply need to work beyond their contractual retirement age and may ask their employer to facilitate this. In responding to requests to work beyond the current contractual retirement age, employers need to be aware of the employment law implications of their decision and how their decision might also impact on any pension scheme they operate.

There is no statutory compulsory retirement age in Ireland, however, employers often specify a contractual retirement age to coincide with the current state pension age of 65 or have a well-established retirement age. Employers already face challenges in seeking to retain a specified contractual retirement age and those challenges are somewhat complicated by the interplay between relevant domestic and EU legislation and case law. It is likely, however, that more employers will be faced with considering these difficult issues on foot of the change in state pension. For those employers who want to insist on maintaining their current retirement age of 65, it is likely that they will have to objectively justify that retirement age and demonstrate that it is legitimate, proportionate and necessary. Employers would be well advised to seek legal advice on these issues on their options from an employment law perspective.

The trustees of related occupational pension schemes need to be mindful of any implications for their pension scheme of the change in state pension age. Trustees should be reviewing their governing scheme documents to assess whether the scheme is integrated with the State Pension (Transition) and identify the implications for the scheme if it will have to be operated on a non-integrated basis from 1 January 2014. Integration, for this purpose, means that the manner in which benefits or contributions are calculated take account of the State Pension (Transition). Depending on the wording of the pension scheme documents, there may be increased financial liability for the employer and or scheme members when the State Pension (Transition) is abolished. Trustees should also be aware of the late retirement provisions within their trust deed and rules should it become necessary to use them.

It may be possible to address issues by amendments to the scheme documents, however, sponsoring employers and scheme trustees will need to be satisfied that they do not breach any restrictions on the amendment power within the scheme documents and trustees must satisfy themselves that they are acting in the best interests of members in making those amendments. See comment later regarding new legislation.

In some instances, bridging pensions are paid for a period before the state pension is payable e.g. where someone has retired early and bridging payment is made to them until they receive the state pension or until age 65. Consideration needs to be given to such pensions and how they are provided and whether it will be possible to discontinue them at age 65 if that is the current arrangement. Some of the issues may be complicated by the fact that the Pensions Act 1990 generally prohibits the reduction of pensions which have come into payment subject to certain exceptions.

Legislation has recently been enacted which inserted Section 59H into the Pensions Act 1990 to facilitate pension scheme amendments in relation to certain bridging and integrated pensions with the intention of overcoming some of the issues in relation thereto. However, there are flaws in the wording of this new legislation so trustees and employers will need to take advice in relation to their own circumstances.

These are just some of the issues to be considered on foot of the impending change. Pension scheme trustees need to review their pension trust deeds and rules and consider what action, if any, they need to take. Employers should review their workforce statistics to identify those affected on or after 1 January 2014, and the numbers involved and start considering their response to possible requests from employees to remain in employment after their contractual or normal retirement age. Ideally, employers and trustees should work together to understand their respective issues and potential options for addressing same.

Both employers and pension scheme trustees will need to take legal advice as necessary. There are no simple answers to these issues and it is almost inevitable that there will be legal challenges to some responses.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.