The proposals are a key part of the European Employment Directive, which prohibits age discrimination in employment and vocational training. The Government is committed to implementing the Directive by 2006.
Following extensive consultation, the Government has concluded that legislation should:
Set a default retirement age of 65, but also create a right for employees to request working beyond a compulsory retirement age, which employers will have a duty to consider;
Closely monitor the appropriateness of keeping a retirement age, subjecting it to formal review five years from implementation.
Currently, employers can set whatever retirement age they like, with many workers being retired at 60 or even younger. But under these reforms retirement ages below 65 will be allowed only if they can be shown to be appropriate and necessary.
This decision has no impact on the age at which people can collect their state pension.
Hewitt said: “It is vital that we widen the pool of workers so that employers can make the most of the full range of talent and skills available. Research suggests that age discrimination costs the UK £16bn a year.
“We have listened to strong representations arguing that many companies still rely on a default age for business planning purposes; and there is a danger that, without one, there could be adverse consequences for occupational pension schemes and other work-related benefits. However, we will monitor the effects of the provisions closely and will fully review the position in five years’ time,” she said.
“Employers will be free to continue to employ people for as long as they are competent and capable. The right to request will help provide more choice and flexibility for those who wish to stay in work beyond retirement.”
Johnson said an increasing number of employers are organising their workforce planning around the best practice of not having any fixed retirement age at all.
He strongly hinted that the Government would be prepared to abolish compulsory retirement ages by 2011. “Ultimately we look forward to a future where people have complete choice about when to stop working, and retirement ages become a thing of the past,” he said.
“If the formal review of the legislation suggests that we should abolish compulsory retirement ages, then that is what we will do.”