UK: Abolition Of The Default Retirement Age – Last

Last Updated: 9 March 2011
Article by Rachel Stone

The Department for Business, Innovation & Skills has confirmed that the Default Retirement Age (DRA) will be abolished on 1 October 2011. From 6 April 2011 employers will no longer be able to issue notifications of retirement under the current statutory retirement procedure.

What are the implications of the abolition of the DRA?

Between 6 April and 1 October, only employees who were notified before 6 April and whose retirement falls before 1 October can be retired using the DRA. After 1 October an employee cannot be compulsorily retired and you will only be able to operate a compulsory retirement age if it can be objectively justified./p>

If you wish to retire an employee under the current statutory retirement procedure without risk of an unfair dismissal or age discrimination claim, you must act now.

The Government's transitional provisions state that employers must have notified employees of their retirement on or before 30 March 2011 if using the current statutory retirement procedure. You may use the short-notice provisions, which allow two weeks' notice, as long as notice is issued on or before 5 April 2011, however this is not without risk. An employment tribunal can award up to eight weeks' pay to an employee who has been given less than six months' notice of retirement.

Under the transitional provisions, if notification of retirement of between six and twelve months is given by 5 April 2011, and an extension of up to six months is agreed through the right to request procedure, then the latest possible retirement date that can be set using the DRA procedure is 3 October 2012. In these circumstances, the employee must exercise their right to request to work beyond retirement by no later than 5 January 2012.

What action do we need to take if we wish to issue notification of retirement before 30 March 2011?

You will need to follow the current statutory retirement procedure:

  • Step 1 – Notice in writing by employer (between 12 - 6 months before intended retirement)
  • Step 2 – On-going duty to inform the employee (up to 2 weeks prior dismissal)
  • Step 3 – Employee's right to request to work beyond retirement age (must be in writing within 3 months of retirement date)
  • Step 4 – Employer's duty to consider such a request (no obligation to agree)
  • Step 5 – Employer's duty to hold a meeting/ make decision/ notify (Employee entitled to be accompanied by colleague)
  • Step 6 – If employee appeals, employer must hold an appeal meeting and confirm decision in writing.

Will we still able to have a contractual retirement age after 1 October 2011?

It is possible to have a contractual retirement age after 1 October 2011, provided that you can justify it. However, to justify a compulsory retirement age, you must be able to show that it is a proportionate means of achieving a legitimate aim and this will be a difficult test.

For example, the aim of saving money by getting rid of older workers who might be paid more than a younger worker doing the same job will not by itself be a legitimate aim. You will not be able to rely on generalised assumptions as sufficient evidence of justification and will need to provide valid evidence if your retirement age is challenged.

Alternatively, if you have no contractual retirement age, you may be able to retire individuals on a case by case basis but it will be difficult to justify such a retirement where you do not consistently apply a retirement age to all employees in similar roles. You will also have to follow a fair procedure under normal unfair dismissal rules. If you can objectively justify the retirement, it will be considered a dismissal for 'some other substantial reason' under the unfair dismissal rules.

How will we be able to retire an employee if we cannot objectively justify having a retirement age?

If you wish to dismiss an employee, you will have to be able to show that the grounds for doing so are one of the potentially fair reasons for dismissal (ie capability, conduct, redundancy, illegality or some other substantial reason). For example, if you wish to dismiss an employee due to poor performance, you will have to do so on the grounds of capability. To be able to rely on capability as a ground for dismissal, you will have to have evidence of poor performance and have followed a fair procedure.

What impact will the abolition of the DRA have on benefits?

The Government has indicated that it plans to introduce an exception for group risk insured benefits (such as permanent health insurance and private medical cover) provided by employers so that it will remain possible to cease to provide such benefits once an employee has reached the age of 65. However, no comparable exemption will apply to other employee benefits which accrue with age, nor will there be any change in respect of occupational pension schemes.

What do we need to do now?

We would advise you to carry out an audit of your current workforce to identify which employees will be 65 or over on or before 30 September 2011. Consider whether you wish to retire these staff under current statutory provisions by issuing notices of retirement by no later than 30 March 2011. As long as you follow the statutory retirement procedure, you will avoid having to objectively justify the retirement.

For employees who are 65 after 1 October 2011, you will need to consider whether you can objectively justify having a retirement age. If not, you will need to ensure you have policies and procedures in place for you to be able to dismiss an employee for a fair reason (ie on grounds of conduct, capability or redundancy). We recommend that you have regular discussions with all employees to consider their performance and future plans as part of a personal development or appraisal system.

Timetable – summary of key dates

30 March 2011

This is the final date on which you will be able to issue the minimum six months' notice of retirement required for a retirement to take effect before 1 October 2011 to ensure that the reason for dismissal is retirement for unfair dismissal purposes and to avoid claims for age discrimination.

5 April 2011

This is the final date on which you will be able to issue notifications of retirement under the statutory retirement procedure. (Any notifications between 31 March and 5 April 2011 will be under the short notice provisions and carry the risk of a tribunal award of up to eight weeks' pay for notification less than six months).

6 April 2011

You will have to be able to justify any compulsory retirements notified on or after this date, including any retirements that are to take place before 1 October 2011.

4 April 2012

This is the last date on which retirement can take place using the DRA procedure if twelve months notice is given by 5 April 2011 (this can be extended up to six months under the right to request procedure so the last possible date for retirement of an employee under existing law would be 3 October 2012).

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.

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