Workers to be given new rights over retirement date

Five years after the EU Employment Framework Directive (2000/78 EC) containing anti-age discrimination measures was adopted, the government has published a consultation paper* on draft age discrimination Regulations. This is the final stage of a long consultation procedure that began two years ago. The latest paper builds on a statement made to parliament at the end of 2004 by Patricia Hewitt, the then Secretary of State for Trade and Industry. The two main provisions she announced were the introduction of a default retirement age of 65 and a right for employees to request to continue working beyond the age of 65.

More information is given about these two changes in the latest paper. It also details other amendments to employment rights resulting from the introduction of the planned legislation.

New retirement procedures

The paper distinguishes between normal retirement age, when employees finish working, and normal pension age, when benefits become payable. The latter is unaffected by the proposed changes. In the case of the former, employers will only be able to operate a compulsory retirement age of less than 65 if it can be objectively justified.

The consultation document describes the concept of "planned retirement". If employers follow the correct procedures surrounding planned retirement, it will nonetheless be extremely difficult for employees to claim unfair dismissal after age 65 (or an employer's lower retirement age that can be objectively justified). If a retirement does not meet the criteria for planned retirements, and an unfair dismissal claim is brought, the employer has to prove that the retirement is "genuine". The upper age limit on unfair dismissal and redundancy claims is being abolished to permit claims to be brought in these circumstances.

Under a new "duty to consider" provision to be introduced by the Regulations, employees must be informed at least six months before retirement age of the right to request to work beyond that age. Failure to follow the correct procedures may be considered unfair dismissal.

Pension scheme changes

The draft Regulations make extensive use of exceptions permitted by the EU Directive that permit the fixing of ages for admission to schemes and for calculating scheme benefits, so that the operation of schemes may continue broadly as at present. The use of age criteria in actuarial calculations will also be allowed. There is a long list of specific exemptions ranging from the use of qualifying periods for admission to schemes to the setting of age limits for the payment of children's pensions. State pension benefits are unaffected by the changes.

The draft Regulations make it unlawful for trustees to harass or discriminate against members on the grounds of age. Every scheme will be assumed to include a non-discrimination rule and trustees will have powers to alter schemes to comply with the law.

Next step

The consultation closes on 17 October 2005. The government intends to bring the Regulations into effect from 1 October 2006. However, it has also announced its intention to review the default retirement age in 2011. If it believes that the necessary cultural change has been achieved, it will abolish the default retirement age.

The draft Regulations have been broadly welcomed by employers' organisations, although the Employers' Forum on Age has expressed concern that the planned retirement process will add levels of bureaucracy and pose difficulties in meeting the expectations of employees. Both the TUC and Age Concern have repeated earlier criticisms that the government has missed the opportunity to abolish mandatory retirement ages.

* "Equality and Diversity: Coming of Age. Consultation on the draft Employment Equality (Age) Regulations 2006", available from the Department for Trade and Industry's website (at www.dti.gov.uk/er/equality/age.htm ) or from the homepage via "Consultations".