Consultation on retirement age closes

2 February 2010

The government's consultation into the future of the default retirement age of 65 has closed.

At the moment, employers can oblige workers to retire at 65 unless both parties agree otherwise.

However, the government is looking at proposals to scrap the default retirement threshold and to give employees the right to continue working beyond 65.

Responding to the consultation, the Institute of Directors (IoD) said that the minimum retirement age should be raised to 68.

The employers' group conceded that, with more people wanting to work past 65 because they are living longer, healthier lives, there is a need to review the UK's existing retirement framework.

But the IoD went on to warn that, while many people will be capable of doing their jobs past 65, it is important that the government recognises that this will not be possible for all employees in all types of job.

Small firms, in particular, may find it impossible to redeploy older workers to suitable jobs.

For these reasons, many employers will continue to need the flexibility provided by the default retirement age, the IoD said.

That still, however, leaves room for reform in the IoD's view. The automatic retirement age should be raised, initially, to 68 as this would enable people to work longer, while ensuring that employers retain the flexibility they need to manage their workforces.

Miles Templeman, director general of the IoD, commented: "In a highly competitive business environment no sensible employer wants to lose good staff just because they've reached a certain age.

"Equally, it is important that capable employees, who want to work longer, have the opportunity to do so. We think that the current system, where employees can work beyond the default retirement age with the agreement of their employers, is sound in principle and supports both parties."

Mr Templeman added: "However, it's important that the UK's retirement system evolves in line with modern working practices. On this basis we would support the default retirement age being raised initially to 68. This would allow people to work longer, while ensuring that employers retain the flexibility they need to manage their workforces."

The Forum of Private Business (FPB), which represents smaller firms, argued that any change to the age at which people could be obliged to retire may damage the competitiveness of small employers.

For the FPB, many businesses are aware of aware of the skills and experience older workers can bring, but the business group also put the case that dropping the default retirement age would force business owners to keep on over-65s, whether they want to or not.

This, the FPB believes, will prove a huge problem for thousands of small firms, hampering their abilities to plan for the future.

Phil Orford, the FPB's chief executive, said: "I don't think anyone would dispute the valuable contribution older workers make to the economy.

"However, at the moment, there is nothing to stop anyone from working beyond 65, providing it suits both parties. The current law works perfectly well, so why tamper with it?"

Mr Orford went on to say that abolishing the compulsory retirement threshold would have implications for employment law and could open the door to costly employment tribunal cases.

In its response to the consultation, the FPB said: "Most employees are certainly competent enough to work beyond the age of 65 without a significant deterioration in their abilities. However, for those employees not willing to leave voluntarily, there will eventually come a time when the needs of the business will have to be considered.

"In the absence of a default retirement age, the only viable option available to an employer is a capability dismissal based on the declining competence of the worker. We believe this would be an undignified and humiliating end to a career for most staff."