Personnel Today’s Ditch the Retirement Age campaign called on the last Government to remove the default retirement age in 2011. We propose to do just that – acting fast and starting the process within my first 100 days of office.
The Chancellor announced in the Budget that the DRA would be phased out from April 2011. We have now come forward with plans to consign it to history by October 2011.
As people are living longer, and benefiting from healthier lifestyles, more individuals want and are able to extend their working lives. Older workers bring with them a wealth of talent and experience as employees and entrepreneurs. They have a vital contribution to make to our economic recovery and long-term prosperity.
While Personnel Today and the Employers Forum on Age have led the campaign to ditch the DRA, I am well aware of other groups’ desire to keep it. That is why the Government is committed to consulting with employers to find the best way of achieving a phasing out. The Department for Business and the Department for Work and Pensions will do this jointly.
Your organisations are the ones that will be affected; some of you will use the DRA and some of you will have been working without a retirement age for some time. We’re launching a 12-week consultation on 29 July, and want to hear from anyone who believes they have something to say on our proposals.
Removal of the DRA will begin in April 2011 with transitional arrangements covering the period until 1 October 2011. We also propose to help employers by removing the administrative burden of statutory retirement procedures. With the DRA removed there is no reason to keep employees’ “right to request” to work beyond retirement or for employers to give them a minimum of six months’ notice of retirement.
I appreciate the statutory retirement procedure could provide a useful trigger for employers and employees to have a discussion about retirement plans without fear of repercussions on either side. That is why the consultation asks whether the Government could provide additional support for individuals and employers in managing without the current process. This includes the possibility of future guidance or a more formal code of practice on handling retirement discussions.
Views are also being sought on whether removal of the DRA could have unintended consequences for insured benefits and employee share plans.
At this point, I should clarify one thing. There will always be jobs where fixed retirement ages are needed. One obvious example of this would be our armed forces who will be unaffected by these proposals. It will still be possible for individual employers to operate a compulsory retirement age, provided that they can objectively justify it.
Removing the DRA is just one of the steps Government is taking to help and encourage people to work for longer against the backdrop of demographic change. Others include reviewing when the state pension age should increase to 66 and re-establishing the link between earnings and the basic state pension.
Many people aren’t saving enough for retirement and risk not having the income they would wish to if they retire at the “traditional” retirement age of 65. By working for one year past current state pension age (60 for women, 65 for men), they can increase their retirement income by between 3% and 10%. Quite apart from that there are those who want to stay in work for reasons other than financial ones. For many, work provides a sense of identity, contributes to their social network, or is simply something they enjoy doing.
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This Government has made a pledge to phase out the DRA, but as HR professionals, it is crucial we hear your voices. If you have something to say and want to help us shape this policy, take part in our consultation.
Edward Davey is the employment relations minister
