Over recent years the default retirement age has been a hotly debated topic both in Guernsey and Jersey.

The Default Retirement Age (DRA) in both islands, for those wanting to retire, is currently 65 (as defined in the Social Insurances (Guernsey) Law, 1978 and the Social Security (Jersey) Law, 1974) irrespective of circumstances. However, with people living longer healthier lives, the islands could see the end of the line for the DRA.

Since 2009, this has been a live issue for Guernsey and never strayed too far from the spotlight. The States of Guernsey have already made their feelings known by openly recommending an increase in the DRA from 65 to 67 in what it considers to be "proper long-term planning" to help fund the Bailiwick's pension scheme.

And it seems that not only is Guernsey facing the debate. Jersey has this week announced it has similar plans, saying that "drastic changes are needed". The States of Jersey agree that people may have to work longer in order to pay higher social security contributions as the current position regarding its state pension scheme "is not sustainable for the long term", with a review indicating that the Social Security Fund could be exhausted in 25 years. To this end, Jersey's politicians have recently voted in favour of legislation which raises the DRA from 65 to 67 by 2031. So is the DRA facing the end of the line?

It would appear that the answer is "yes" - in light of the ongoing debates within the islands, coupled with the introduction of the Equality Act 2010 in the UK, it does seem that the days of the DRA are numbered.

In the UK the DRA, which allowed employers to force employees to retire at 65, is being abolished. The Government bowed to persistent pressure from various age-related charities, which recognised that demographic changes, together with financial, health and social benefits, has necessitated that people work longer. A phasing out of the DRA commenced earlier this year and is set to continue until 1 October 2011; after this date, the DRA will be abolished in the UK in its entirety.

This is effectively good news for UK employees - for the first time, they have a choice whether or not to retire at 65. Not such good news for UK employers - they can continue to set a DRA in a contract of employment and/or staff handbook, but this age must be objectively justified, i.e. showing that their chosen retirement age is "a proportionate means of achieving a legitimate business aim". The key to managing successful employer/employee relationships is open communication; managing the needs of a business against the needs of an older individual. The practical effects of the DRA's abolition in the UK will only be seen after October 2011 once various issues come into play. Collas Crill will be monitoring the position closely and provide regular updates on the implications for you and/or your business.

So what does this all mean for the Channel Islands?

Although the islands do not presently have any laws relating to forced retirement, a DRA is usually stipulated in an employee's contract of employment and/or staff handbook. If an employee wishes to retire at 65 then he/she may do so pursuant to the express provisions of their employment. If, however, they wish to continue working beyond that age, then he/she may do so providing it is with the agreement of the employer. It is notable that while age discrimination legislation is on the horizon in Jersey, an "upper age limit" remains in respect of claiming unfair dismissal. Currently an employee is prohibited from claiming unfair dismissal once they are over 65 unless they satisfy certain criteria. In light of the recent move to increase the DRA, it is anticipated that this provision will either be amended, or more likely, removed.

At present, Guernsey has no such "upper age limit"; every employee shall have the right to pursue a claim for unfair dismissal, subject to the relevant qualifying period. It should be noted that this probably means that specified retirement ages in contracts of employment are ineffective if the employee does not want to retire upon attaining the relevant age. In order to avoid an unfair dismissal, the employer can only dismiss the employee for one of the potentially fair reasons specified in the Employment Protection (Guernsey) Law, 1998 (which do not include attaining a particular age) although if an employer were to dismiss an employee pursuant to an express contractual term specifying a compulsory retirement age then the tribunal may have some sympathy and may exercise its discretion to reduce any award it would otherwise make.

In any event, increasing the DRA for receipt of States pensions is unlikely to be welcome news for Islanders; the prospect of working even longer just to ensure that they have a financially healthy retirement will seem, to some, as an unreasonable turn of events. But that said, it is very hard to see that there is any real alternative given the increases in life expectancy and pressures on public spending. It is a simple fact that the average worker's retirement is likely to be longer than ever before - how else will that be paid for?

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.