Default Retirement Age abolished from 1 October 2011

18 June 2012

Default Retirement Age abolished from 1 October 2011 The Default Retirement Age (DRA) of age 65 is soon to be abolished but unless an employer served notice to retire that employee before 6 April 2011 they can no longer rely on the DRA. Employers can determine their own retirement age but in order to avoid age discrimination it must be objectively justified. The transitional period that sees the DRA being phased out has already begun and from 30 September 2011, employers will no longer be able to retire their employees at age 65. In most jobs employees will be able to choose when they want to retire. If an employee is due to retire when reaching the DRA, employers must have already given a minimum of six months notice of retirement but no more than 12 months notice on or before 5 April 2011. If this notice was given, the retirement can continue providing the following conditions are met: • The DRA procedure, as set out in the Employment Equality (Age) Regulations 2006 (the Regulations), is followed correctly and;. • The person retiring has reached 65 before 1 October 2011. Therefore an employee must be 65 by the 30 September 2011 if they are to be retired using the Regulations. If an employee exercises their statutory right and requests an extension of their period of notice of retirement, an employer can agree this and still rely on the Regulations to enforce the retirement, providing that the extension is no more than six months and the employee retires on or before 5 October 2012. The employee's right to request to work beyond retirement ceases on 5 January 2012. If an employee is retired after 1 October 2011 but the Regulations have not been followed, this will amount to age discrimination unless the requirement can be objectively justified, for instance if a certain level of fitness is required within the role and an employer can show that this is a legitimate requirement. It is unlikely that any retiring age below age 65 will be lawful. An employee's state pension age and entitlements will not be affected by the changes and take home pay would increase as it does not attract National Insurance contributions once an employee reaches State Pension age. However if an employee decides to work beyond age 65 their entitlement to certain work benefits such as life and health insurance may be affected as an employer may refuse cover if the term of the policy does not permit this or the cost is prohibitive. This may cause difficulty if the employee is contractually entitled to such benefit. The practicalities of managing an older workforce, ensuring that policies and practices retained by the employer are fair and consistent, whilst promoting performance management and succession planning are all things amongst others, which require thought and action by an employer. Employers leave themselves open for potential claims of unfair dismissal and age discrimination where they have retired an employee outside of the permitted circumstances set out above and in circumstances where it cannot be objective justified. • For additional information please contact: Alexandra Dean of Gepp & Sons. The above is not legal advice; it is intended to provide information of general interest about current legal issues.