Work ’til you drop

Dumbledore - final salary pension scheme?

The Government announced last week that the Default Retirement Age is to finally be abolished from next year. This means that by October 2011 it will no longer be lawful for employers to demand that their employees retire at 65. The previous government announced it was going to review the issue last year  veryshortly before the final hearing in the Heyday saga (and did so probably to avoid losing the case and face).

It’s to be welcomed because people should be able to work beyond 65 if they wish. More to the point, with the increasing number of people living longer and most of us making inadequate provision for our retirement, as well as probably being saddled with mortgage and other debts beyond the conventional retirement debt, many of us will have no choice but to continue working. To that extent this isn’t a major liberalising move but a reflection on the fact that we’re in debt and not producing enough children to keep doing the work to raise the taxes. The default retirement age had to go.

The eternally useful magazine Personnel Today reported that the Government is claiming the move will actually save employers money – £45 million rising to £71 million per year apparently – mainly through there being fewer Tribunal claims from older employees claiming age discrimination. Personally, I’m not convinced by this mainly because it is the government’s estimate and they’re probably just trying to assuage employers. Secondly, claims for age discrimination will be replaced by older employees claiming unfair dismissal and age discrimination when the employer tries to terminate their employment on grounds of capability. On the other hand, HMRC will receive more tax revenues from continuing workers – £132 million per year apparently.

The current Age Discrimination rules apply the default retirement age of 65, but provide a procedure whereby those employees who wish to continue working can apply to do so. The employer doesn’t have to consent but, if they refuse the request they need to be able to justify the decision or end up facing a claim for age discrimination. From the proposals put forward now it seems that the employer will still be able to impose a compulsory retirement age but, again, will need to be able to justify it as a “proportionate means to achieve a legitimate end”. It will be a brave employer that does try to do so.

Dumbledore (above) needn’t worry – he’s probably got a Final Salary pension from the Ministry of Magic and, er, he doesn’t exist anyway.

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