The default retirement age is likely to be raised or scrapped far earlier than Conservative plans to increase the state pension age to 66, meaning employers should already be reviewing their retirement policies, experts have warned.
Shadow chancellor George Osborne is expected to outline more detail on the plans to raise the pension age to 66 in 2016 in his keynote speech to the Conservative Party Conference later today. The plans would save £13bn a year, helping to reduce the UK’s huge public deficit.
At a glance: Pension and retirement facts
Owen Warnock, partner at law firm Eversheds, said: “If a Conservative government is elected and brings this measure into force, clearly the default retirement age, at which employers can force employees to retire, will have to be increased to at least the new minimum age for state pension.”
Warnock added employers could be certain that the DRA would be raised to as high as 70 much sooner than 2016, or scrapped altogether.
“This is for two reasons; first the current government has announced a review of the default retirement age and signalled quite clearly that an increase is on the cards. Secondly, the High Court indicated 10 days ago in its judgment in the Heyday case that the age of 65 would not be “justified” under European law for much longer. In fact it is quite possible that, rather than raising the default retirement age, compulsory retirement will be banned altogether.”
Susie Munro, employment law editor at XpertHR, told Personnel Today: “If the state pension age is raised to 66 for men, but the default retirement age remains at 65, someone could be in the position of being forced to retire but unable to draw his state pension. In reality, this situation is unlikely to arise, as the High Court gave strong guidance in the recent decision in the Heyday case that the default retirement age will have to be raised or abolished.”
What’s the difference between the retirement age and the pension age?
The state pension age is the age at which someone can draw his or her state pension, (as long as they have made the required National Insurance contributions). Employees don’t have to retire at this age, and they can defer drawing their state pension.
The default retirement age is set in the age regulations as 65 – employers can force someone to retire at or above this age.
Munro said a Conservative government would be expected to deal with the rules on the DRA before changing the state pension age. “With this in mind, employers should already be reviewing their retirement policies with a view to ending the use of mandatory retirement at 65 unless it can be justified.”
The government announced plans to remove the DRA for all civil servants last month, and said it intends to bring forward a review of the legislation which allows employers to set a minimum retirement age of 65.
Meanwhile, an employers’ body has said Conservative plans to increase the pension age for men to 66 earlier than expected are “sensible” to cut the public sector deficit.
David Yeandle, head of employment policy, at manufacturers’ body the EEF, said: “Reviewing the timetable for raising the state pension age seems a sensible approach in view of increasing longevity and the need to cut the public sector deficit.”
Coverage of Cameron’s speech on Thursday
|Personnel Today will be covering David Cameron’s speech to the conference live on Thursday at 2pm, with the help of three leading employment panelists from the EEF, the Work Foundation and the Institute of Employment Studies. Make sure you log on to Personneltoday.com on Thursday to see the latest employment news being reported as it happens, with expert commentary on what this means for HR professionals.|