Should the default retirement age of 65 be removed?
Catharine Pusey, Interim chief executive, Employers Forum on Age (EFA)
Yes, the EFA believes the default retirement age should be removed. Not only is it discriminatory to ask someone to leave their job simply because they’ve reached a certain age, it’s bad for business, bad for the individual and bad for the economy.
Neil Carberry, Head of employment policy, CBI
We think it should stay. Essentially the default retirement age creates a situation where at approaching 65 the employee and employer can sit down and discuss the available options. This means the employee gets to request working on if that’s what they want to do and the employer has an opportunity to assess what they have to offer.
What will happen if it is removed?
Catharine Pusey Workers over 65 have much to contribute, and enjoy the challenges and interaction working life provides. As people now start families at a later age, many workers still have mortgages to pay and dependants to provide for when they reach 65, so have an economic need to continue working. Most people collecting their pensions now will have over a third of their lives ahead of them. It is simply unsustainable for the economy to support this and keeping more people in employment helps to keep the dependency ratio in check. Many employers use retirement as a way to solve performance issues. We believe that all performance issues, at any age, can and should be managed through robust performance management programmes.
Neil Carberry The problem with getting rid of it is you create a difficult position from a manpower planning point of view – particularly for smaller organisations (SMEs). It also causes problems for succession planning. Most importantly, it would remove a fairly dignified way for people to leave the workforce. If someone is not performing at 63 or 64 and has been there for 20 years, often the employer will say: “This person has given me years of good service but is not performing quite so well now, but as they’re only a year or so away from retirement we’ll let them retire.” Remove the default retirement age and you will see a significant upswing in disciplinary dismissals because there will be no other choice.
Should firms be encouraged to employ older workers?
Catharine Pusey Firms need to be encouraged to see age diversity in the workplace as positive and stop making decisions based on their employees’ ages. We have found that organisations that have strong performance management systems have no need to retire people because they’ve reached 65. They don’t fall into the trap of equating age with ability. Instead they enjoy the benefits of a workplace rich in diversity and talent.
Neil Carberry Before the right to request came in people left work at 65 and that was that. The world has changed and we have seen a relatively high level of acceptance. Our survey for the past year shows that about 30% of people reaching 65 now request to work on, and 80% of those requests are granted. Where employers can, they do. Why would you get rid of a member of staff who is valuable, knows how you do business and is very reliable?
Do older workers provide extra challenges for HR?
Catharine Pusey Since the age regulations came into force in 2006 all HR departments have had to really understand the issues around age discrimination in the workplace. They have realised the need to implement policies that prevent age discrimination and keep all workers safe from being unfairly judged on their age. This is no different from any of the other diversity strands, and must not been seen as ‘extra challenges’.
Neil Carberry We all accept that people will want to work longer. As soon as the state pension age goes up from 65 to 68 we agree that the default retirement age should follow. It seems to be a sensible way of running things and is quite flexible. But our figures show that in 20% of cases there isn’t anything an employer can offer people who want to work on. It comes down to SMEs where there are relatively few options, or jobs that involve heavy lifting or where there are great physical demands and where changing from the job you have been doing is less of an option. That’s why big companies are often able to cope with removing the default retirement age, because they have such a large internal labour market and have the option to do things like move people to other divisions where they can do something more suitable.
What are the major pros and cons of the current legislation?
Catharine Pusey Many employers offer a variety of schemes to provide for employees whose working life is affected by death, incapacity or other catastrophes. These schemes are often provided across the board to all employees, but used to cease at retirement age. The age regulations now mean that an employer needs to continue cover for those choosing to work beyond 65, and that cover needs to be on the same terms as for younger workers. Dealing with this at an acceptable cost has been a headache for many employers.
Neil Carberry Staying on in employment does not necessarily mean staying in the same job. And if the same job is all the employer can offer and that’s no longer appropriate for you, then your employer is probably right to say so. The current situation gives you a focus for a discussion that simply wouldn’t take place if we remove the default retirement age and didn’t take place before the right to request came in. We have come up with a pretty good deal that has offered more to employees yet still allows employers to ask the questions they need to ask.
However you look at it the UK workforce is getting older. Here’s why:
- The employment rate for workers aged 50 and over has continuously increased since 1993.
- People of working age represent 62% of the UK’s population. Currently, 48% of these are aged between 40 and 59/64.
- In 2006 more than 6.3 million people aged between 50 and the state pension age were in employment. At the same time 9.6% of men aged 65 and over and 11.1% of women aged 60 and over were still in employment. – The UK’s average retirement age is 63.8 years.
- The number of people over 65 and still economically active will increase from 582,000 in 2005 to 775,000 in 2020 – a rise of 33%.
- 81% of people with degrees aged 50 and over work until statutory pensionable age or beyond, compared to 52% of those with no qualifications. – 8% of men aged between 50 and statutory pensionable age work part-time, an increase from 5% 10 years ago: 40% of men aged between 65 and 69 are in part-time work.
Source: National Statistics/DWP, 2008
Have your say
Audrey Williams, partner and head of discrimination law, Eversheds
In terms of cultural change and attitudes to older workers there is a strong argument for removing the mandatory retirement age. The question is will employers still be permitted to adopt their own retirement age and arrangements if the government abandons the mandatory default age? Many employers would favour retaining the option to identify a retirement age and make arrangements within their business for operational, succession planning and management purposes. If employers were permitted to adopt what is appropriate for their business and justify it, this would begin to ensure that employers address the reality rather than assumptions about age.
James Davies, partner, employment and incentives, Lewis Silkin
The default retirement age should be raised, possibly to 70. There is no good reason why workers should lose rights at 65 and, indeed, the current laws can encourage some employers to dismiss prematurely at 65. However, there are major issues with pensions as it is unlikely that an employer could exclude an employee from continuing to accrue service after a particular age. For defined benefit schemes this can be problematic, as many schemes do not allow those over a particular age to continue to accrue additional pension. The status of expensive insured benefits such as life cover, medical insurance or income protection schemes also needs to be resolved.
Marion Bloodworth, counsel, employment practice, Lovells LLP
Employers like the statutory retirement age since it allows for certainty in managing workplace succession, and avoids the need for potentially difficult conversations with older employees whose performance and enthusiasm for work may be declining. In the current climate, retirements can also assist in reducing workforce numbers. If it does go, there will be added pressure on employers to proactively manage performance issues. It will also make succession planning harder, with the risk that ambitious employees seeking promotion will not be prepared to wait and will simply move elsewhere.
David Yeandle, head of employment policy, Engineering Employers’ Federation
There is no problem with a company deciding to voluntarily remove the default age if they decide it suits their business or customer base. For instance, B&Q recognises that older customers prefer to deal with older employees, so for them it is a business rationale. But most EEF members are not customer facing and for many of them it provides a dignified manner for people to leave. Psychologically within many organisations it would be very damaging to have to effectively dismiss people after what may be 30-40 years of loyal service. It will leave a very bad taste in the mouth.
Youth in decline
- It’s not only older workers that employers need to think about. Younger workers are also providing a number of serious challenges.
- The percentage of the population aged under 16 has been declining since 1995 and, for the first time, has dropped below the percentage of the population of state pensionable age.
- In 2004 there were 11.6 million people aged under 16 in the UK, a decline of 2.6 million since 1971. There are one million fewer people in their 20s than 10 years ago.
- From 2010 onwards the number of young people reaching working age will begin to fall by 60,000 every year. Younger employees are more likely to take sickness absence than older employees, with 3.2% of 16- to 24-year-olds and 3% of 25- to 34-year-olds taking at least one day off sick a week.
- Among men, those aged 16 to 24 were the most likely to be off sick (2.9%) whereas for women, those aged 25 to 34 had the highest rate of sickness absence (3.6%).
Source: ONS/ City and Guilds, 2008