The Default Retirement Age: Back from the Dead?

CEO of NOW: Pensions Morten Nilsson

CEO of NOW: Pensions Morten Nilsson

The enforced retirement for employees aged 65 or over was abolished in October last year.  Forcing anyone to retire on the basis of their age is treated as discriminatory unless it is a proportionate means of achieving a “legitimate aim”.  A recent landmark legal case has declared that an aim may be legitimate if it serves the ‘public interest’.

The Supreme Court has ruled that a law firm could impose retirement on its partners in order to allow “associates to move up the ranks to partnership and [give] the workforce reasonable expectations…”[1]  As stated in the ruling, this is “legitimate and justifiable” as it is in pursuit of an aim which is in the public interest, namely promoting youth employment.

This potentially opens the door to other employers to effectively operate a default retirement age (DRA) of exactly the sort that was banned last year.  The ruling confirms that an enforced retirement age can be acceptable under certain circumstances, but doesn’t answer the question of proportionality – whether the firm’s chosen default age of 65 fits its aim.  The case is being referred back to an employment tribunal for clarification on this point.

So, whilst there are routes employers could take should they decide to enforce retirement, they still come with caveats which vary depending on individual circumstances, and the onus is on the employer to justify their decisions with relevant evidence.   It also remains questionable whether enforcing experienced employees to retire in order to encourage youth employment will always be viewed as in the public interest.  The ruling may be a product of its time, and subject to change in line with changing economic and socio-demographic conditions.

Overall, it seems that government’s original intention when abolishing the national DRA, namely introducing flexibility to take account of individual circumstances, remains intact.  With this ruling, however, it appears that when it comes to retirement, the choice is once again   out of hands of individual employees.  Perhaps this is an acceptable middle ground, where employers could retain some control of their succession planning, which was one of the main reasons behind the criticism of the DRA abolition in the first place[2].

Putting the argument in context; it is claimed that even before 2011 only 30% of companies enforced a DRA and, where it was in operation, 80% of requests to work beyond it were granted[3].  Future test cases are needed to determine exactly the full implications of this ruling but for now, if more people are able to work longer, and want to work longer, making it easier for them to do so, makes a lot of sense.  The flexibility may help ease pressure facing pension schemes in the coming years too.  Courts should bear that in mind as they clarify employers’ ability to curb this employee freedom.

[1] The Telegraph, 25th April 2012Employers can force retirement if in ‘public interest’.  Telegraph Media Group Limited

[2] Personnel Today, 23rd March 2012Weekly dilemma: Abolition of the default retirement age.  Reed Business Information

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