Removal of the Default Retirement Age

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14 January 2011
The Government has confirmed that the Default Retirement Age (DRA) of 65 is to be abolished.  From October 2011, employers will not be able to retire employees as a matter of course when they reach 65.

Although October might still seem a long way off, employers should start thinking about how to plan for this. Employers who wish to rely on the current retirement regime (which allows employers to retire employees without risk of unfair dismissal or age discrimination claims if they follow the statutory procedure), will need to consider what to do now.

This is because, under the current regime, employers have to give a minimum of 6 months' notice to retire an employee and the retirement date will need to fall on or before 30 September 2011.  The Government's proposed transitional provisions state that employers need to have notified employees of their retirement on or before 30 March 2011 using the current statutory notification procedure. 

Under the transitional provisions, employers can still rely on the DRA between 30 March 2011 and 5 April 2011, but if you do so you must use the short notice provisions contained in the statutory procedures, under which an employee could still claim compensation. It will, however, not be possible to issue a notice under the DRA regime on or after 6 April 2011.

Given these imminent changes, it would be sensible to review your position to ensure that all employees currently over 65 and/or reaching the age of 65 on or before 30 September 2011, whom you wish to retire, receive their notifications of retirement in time.  Otherwise you won't be able to rely on the DRA to retire these employees and, in the absence of being able to objectively justify any contractual retirement age (a difficult test), you would need to have a fair reason to dismiss them as you would for other staff. 

Many employers have also been concerned about the impact that the removal of the DRA will have on group risk insured benefits, such as life assurance and private medical cover.  The Government has confirmed that it plans to introduce an exception for group risk insured benefits provided by employers so that it will remain possible to cease to provide such benefits typically once a worker has reached the age of 65. 

If you would like to discuss the impact the removal of the DRA will have on your business further, please contact Chris Seaton on 0117 939 2000 or by email to chris.seaton@burges-salmon.com, or contact the lawyer at Burges Salmon with whom you usually deal.

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