Response to consultation on phasing out the default retirement age

Commission’s Response to the BIS/DWP consultation Phasing out the Default Retirement Age

The Government intends to remove the Default Retirement Age, and consulted on its phasing out. In October 2010 the Commission responded to that consultation.

The Commission welcomes the decisiveness of the move to phase out the Default Retirement Age and feels six months’ minimum notification period is an appropriate length of time. A longer transitional period could result in increased uncertainty for both employers and employees.

We agree that Schedule 6 of the Age Regulations (which deals with notifications of retirement and the ‘right to request’ to work past retirement age) should be removed, as it will no longer be required. However we expressed some concern about this in that Employers need to be mindful of the ‘fair reasons for dismissal’ under Section 98 Employment Rights Act 1996, which are capability, conduct, redundancy, illegality or ‘some other substantial reason’. Employers should be reminded of the ordinary unfair dismissal rules in any guidance that is produced.

Guidance

Under the Equality Act 2006, the Commission has powers to produce guidance and statutory Codes of Practice on equality enactments; in relation to the Equality Act 2010, we have used these powers to produce a Code of Practice on Employment together with non-statutory guidance.  After the abolition of the default retirement age, these publications will no longer accurately reflect the law on retirement. By the time the changes to the Default Retirement Age come into force we will have guidance in place. The revised Employment Code and non-statutory guidance would provide guidance on retirement discussions and be illustrated by case examples. We believe this guidance will be sufficient to support retirement discussions between employer and employee.

Older workers' preferences

The Commission’s 'Working Better' project carried out a review of employment preferences, barriers and solutions in relation to older workers (ie those over 50).   The review found that the majority of workers over 50 (62 per cent of women and 59 per cent of men) want to continue working beyond state pension age. Around 60 per cent would like to continue working after state pension age, but on a part-time basis and some 40 per cent would like to stay in their current jobs, but with greater flexibility in hours or days worked.

Many older workers remain ambitious and are seeking promotion and development opportunities. More than twice as many (11 per cent) over 50s want promotion as want to downshift (4 per cent).

Instead of being unfit to work due to ageing and ill health, 62 per cent  of older workers describe themselves as feeling as fit as ever, with structural and attitudinal barriers thwarting their ability to stay involved. There is significant demand for greater flexibility in hours and location of work. Sixty-eight per cent of the over 50s unemployed below state pension age and 85 per cent of people inactive and over state pension age said that greater availability of flexible and part-time work would help them to find jobs.

Poor health is one of the main causes of premature retirement. Individuals who feel unable to perform their job as well as they did when younger are significantly more likely to be planning to retire before state pension age, with possibly serious financial implications for their later years. It is significant that one-third of older workers in poor health feel unable to approach their managers to discuss difficulties and request more manageable working arrangements

A majority of 63 per cent of over 50s say the main factor that would enable them to achieve their ideal jobs would be a more open attitude to recruitment among employers: There is concern about employers’ negative attitudes - real or perceived - towards people over 50. Other recent research shows that men over 50 are at greatest risk of long-term unemployment and need swift, intensive support to avoid becoming ‘a lost generation’.

Tackling barriers to the employment of older people requires taking action on a number of fronts: improving the quality and flexibility of jobs available to older workers; occupational health; retirement and pension policies; and attitudes and assumptions about the older generation. This will entail collaboration between government, employers, trade unions, occupational health experts and others.

Many older people are keen to carry on working or to embark on new careers, but they often face obstacles caused by stereotyping, inflexibility or simple lack of imagination about how work could be organised differently.

We need to look for practical solutions, help for businesses and age-management training for managers, flexible retirement, health support for older workers, combating ageist attitudes, better training and career development for the over 50s and the promotion of incentives such as enhanced state pensions for those choosing to keep working.

Insured benefits and share schemes

Our view is that the impact on insured benefits and share schemes should not be a barrier to the removal of the default retirement age (DRA). The balance of the impact on those who have access to these schemes, needs to be weighed against the number of people who could benefit from the removal of the DRA and ideally all employees should have access to any additional financial benefits on offer from their employer.
 
If an employer currently offers a package of benefits to their employees, then they may need to review in more detail exactly what is being offered to whom and at what age.

The choice to work longer, one that is being actively encouraged by government, should not automatically exclude people from the additional benefits of insurance or equivalent value of protection. It is also worth mentioning that there is a well established view that most work is good for people’s health and may in fact keep them healthier for longer and not in need of the benefits on offer by the employer.

However, employers and scheme providers need clear guidance as to what is legal practice, as it is the employer, not the financial services provider, who is responsible for non-discrimination in group insurance schemes.

Insurance coverage can also impact on the suitability of jobs for individuals working longer. We wish to ensure that insurance coverage should be available for all employees and to employers wishing to purchase policies that cover all ages of employee, to ensure that lack of insurance is not a barrier to employment (such as motor insurance for older workers wishing to undertaking roles that require driving) or a means to exclude older workers from such benefits.

We are currently awaiting details of the tailored exception for the use of age in financial services, which will appear in the draft Ministerial Order due to be published this autumn.

Download the full consultation response (Word)

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