Default retirement age: Why we need to keep it

A few generations ago the healthy life expectancy of anyone reaching 65 was just a handful of years, but those retiring today can hope to live for 20 years or more.

Such progress is fantastic, and also forces us to rethink our approach to our working lives and retirement.

More people want to keep working beyond the state retirement age – because they want to stay busy, or to top up their pension – and employers increasingly welcome that. Likewise, the explosion in flexible working of the past few years should help people stagger their retirement.

A ‘greyer’ workforce is inevitable. Projections by the OECD suggest almost one in 10 of the UK labour force will be aged over 60 by 2030. Official figures suggest that more and more older workers are beginning to stick around – the employment rate for men and women over the state pension age of 65 have risen.

Retirement ages will rise to 68 by 2046, in line with the recommendations of the Turner Commission on pensions. The CBI supports this move, and have called for it to go further, as working longer will help our ageing society cope with the demands of pension provision.

My own experience meeting businesses throughout the UK is that employers value the skills and experiences of older members of the workforce, and are ready to invest in them to help keep them with the company.

These developments are welcome, but people will still want and need to retire, whatever the retirement age is. And we will still need a framework for retirement, whenever it happens. That means a conversation between employer and employee, and a hook to hang that discussion on.

Currently this happens through the right to request postponed retirement that all employees can have, but this meeting would not be possible without a set default retirement age (DRA). This is why businesses are so exercised by the misinformed calls – such as that made by the Equality and Human Rights Commission – to scrap a retirement age completely, rather than just raising it over time in line with the state pension age.

Employers remain convinced that the DRA is a key part of current employment legislation. Ours is a very practical argument: the DRA is an essential part of employment practice, enabling businesses to plan and develop their workforces. In its absence, employers would find it increasingly difficult to make necessary changes. Succession planning, staff development and business innovation would all become harder.

And, though it might not be a popular thing to say, the reality is that some occupations are simply not suited to older workers. A rise in competency-based dismissals – before and after 65 – is an inevitable part of getting rid of the retirement age.

Let’s not forget that the retirement age we have is not mandatory, but a default. The current right to request rules are working well. Our latest surveys indicate that 81% of requests to work beyond 65 were granted by employers, with the vast majority (71%) offering full-time employment opportunities and a further (66%) making part-time work available. There are a minority of cases where the employer is unable to keep an individual on after their retirement age and here the DRA ensures that employment comes to an end in an appropriate, dignified manner.

Business arguments for retaining the DRA are often given a bad press. Rather than sensibly debate the issues it is all too easy to set the debate as one of flagrant age discrimination. That approach totally fails to confront the harder questions posed by businesses who believe the DRA is vital in business planning. It is not good enough to just dismiss the DRA as a thing of the past, or as a block on progress.

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Instead, we must foster a national debate about how people retire – as distinct from when they retire – and what the correct legislative structure is to smooth this.

Katja Hall, director of employment policy, CBI