The
Government has proposed a suite of measures to encourage flexible retirement
and increase opportunities for people to work longer, to ease the so-called
pensions crisis. By Sarah Ball
Below
are some key points for HR professionals to note.
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Policy initiatives in this area are currently split between the Department of
Trade and Industry and the Department for Work and Pensions. The former must
implement an EU directive by the end of 2006, to outlaw discrimination on the
basis of age – including at the time of retirement. It is due to launch a
consultation paper on the directive’s implementation in June or July
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Although the State Pensionable Age is currently 60 for women and 65 for men,
people from 50 to 65 are twice as likely to be economically inactive, than any
another group, and the Government is eager to address this discrepancy. The
trend has been established, in part, by organisations with defined benefit
pension schemes using early retirement as a restructuring tool. Furthermore,
organisations currently set their own normal retirement ages beyond which
employees cannot sue for unfair dismissal – some of which are below the State
Pensionable Age
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The DTI summer consultation paper will discuss how to end these mandatory
retirement ages. It is likely to impose a default retirement age, of, say, 70,
so that those who wish to remain working well past the State Pensionable Age
will be able to do so. It will canvass employers’ opinions on what might
constitute ‘objective justification’ from pre-established succession planning
to a generous level of occupational pension
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In the same vein, the Department of Work and Pension’s recent Green Paper
stated people would actually be given incentives to defer taking their State
pension. Someone with a combined state entitlement of £100 a week, for example,
would instead get £150 a week if they deferred taking their state pension for
five years. It could also be taken as a lump sum, which could be something like
£20,000 for a single pensioner, or £30,000 for a couple
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The Green Paper also stated it will change the tax and pension rules to allow
staff to claim their occupational pension and carry on working part-time for
the same employer. The current rules do not allow employees to do this. At the
moment a perverse situation can arise where, after 30 years of loyal service,
an employee ends up working for your competitor down the road, being partially
supported by a pension you are providing to reward them for their loyalty to
your organisation
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Smart employers are currently reviewing areas of their employee benefits
packages with the new proposals in mind – for example, increasing their
flexible working options
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Many employee benefits are subject to age restrictions imposed by providers –
private medical insurance, critical-illness cover, life assurance and permanent
health insurance, for example. The age discrimination legislation applies to
employers but not to such goods and services. There could be extra costs
involved in providing such benefits for older workers. Nationwide, the building
society already allows its employees to work to 70 if they wish, and deals with
this issue by wrapping such insurances into a flexible benefits package
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