Pension shift to help retain older workers

The Government is set to change Inland Revenue rules to make it much simpler
for employers to retain older workers.

Under reforms outlined last week by work and pensions secretary Andrew
Smith, employees will be able to stay on at work after retirement age while
drawing their company pension.

Current IR rules prevent anyone from taking a pension and salary from the
same employer. This makes it virtually impossible for staff to wind down to
part-time work or take a less senior position with the same company while
supplementing their income with a company pension.

Employers have welcomed the move. Director of employment policy at BT,
Caroline Waters, has no doubt that the changes will afford greater flexibility
when planning retirement and help retain key skills. "We have been pushing
for this for a while now. It is critical to see much more flexibility in
retirement," she said.

"It will aid the employee as it opens up a range of rich options."

Ray Baker, head of social responsibility at B&Q, which has already
abolished compulsory retirement, agrees the IR changes will help employers
manage an older workforce. "It would give people a free choice and allow
us to retain good people," he said.

The changes are expected to be announced in the Government’s imminent
pensions Green Paper or in the pre-budget report in November, according to the
Engineering Employers Federation. David Yeandle, the EEF’s deputy director of
employment policy, said: "It would stop older staff taking their skills to
other companies."

The Employers Forum on Age, which has campaigned for the regulations to be
altered, said the move will encourage employers to hold on to their older
staff.

By Quentin Reade

Recent changes on older worker employment:

23 August: A landmark
employment tribunal ruling (Rutherford) gives workers aged over-65 the right to
claim for unfair dismissal and redundancy payments

26 Sept: The Government
announces it is to fight the Rutherford decision at Employment Appeal Tribunal

November: Predicted changes to
Inland Revenue rules on pensions will make it much easier for employers to
retain older workers

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