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The Employment (Contractual Retirement Ages) Act 2025 comes into operation on 29 June 2026, this coming Monday. The Act gives employees a new statutory right to notify their employer that they do not consent to retire at their contractual retirement age where that age is less than the State pension age (currently 66). The Act restricts employers from enforcing a contractual retirement age where the employee has not yet reached pensionable age, unless that retirement can be objectively and reasonably justified by a legitimate aim. While the Act is primarily an employment law measure, its implications for occupational pension schemes are also potentially significant.
Many occupational pension schemes, both defined benefit and defined contribution, have their rules built around a “normal retirement date” which often corresponds to, or is linked to, an employee’s contractual retirement age. Where employees exercise their new right not to consent to retire at contractual retirement age, a number of important questions arise from a pensions perspective, including ongoing benefit accrual, payment of contributions, the timing of members’ benefit entitlements, interactions between scheme rules and the new statutory framework, and the implications for scheme documentation and member communications. Considerations may also arise in relation to insured benefits such as death in service benefits provided through pension schemes. For defined benefit schemes in particular, there may also be actuarial and funding dimensions to consider. There are several different approaches and solutions that schemes and employers may wish to consider, but the most appropriate course of action is likely to vary depending on the structure of the scheme, the approach of the employer to the Act and the composition of the workforce in question.
Given that the Act is now days away from coming into force, we would encourage trustees and employers to consider these issues as soon as possible.
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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