The Government has today confirmed that the long anticipated abolition of the default retirement age of 65 is to become reality with effect from 1 October 2011. The changes will be phased in from April. At the moment, employers can terminate employment at 65 without penalty. Provided the employer follows a set procedure it can avoid unfair dismissal claims and age discrimination claims. The government’s move to abolish the default retirement age ignores the views of employers expressed during the consultation process. Under the current law, retirement can be a matter of agreement between employer and employee or result from an employee serving notice that they are to leave work. It appears that this will not change entirely but the dismissal of older workers will have to be managed either by discussion or by formal performance management procedures. Employers may also want to consider the use of compromise agreements
An exemption may be introduced for employment benefits like permanent health insurance or medical cover. Where it becomes too expensive for employers to continue to offer benefits to older employees it will not be unlawful to discriminate on grounds of age when providing such benefits. The draft legislation is awaited and we will keep you updated.