Update on Abolition of the Default Retirement Age
Lawful retirement at 65 or over allowed but employers only have a short time, until 5th April 2011, in which to act. Read more below.
The Department for Business Innovation and Skills (BIS) has issued amended Regulations in relation to the removal of the Default Retirement Age, which in essence, allows employers to issue notices of retirement to employees who are already 65 or older.
The Regulations as they currently stand will mean that the Default Retirement Age of 65 will be abolished from 6th April 2011. Subject to the transitional provisions, retirements on or after 6th April 2011 will be unlawful unless they are objectively justified.
The transitional provisions allow employees to be lawfully retired provided notification of the employer’s intention to retire them (and of their right to request to work beyond that date) is given on or before 5th April 2011, and provided the employee is already 65 or over, or turns 65 on or before 30th September 2011.
The revised Regulations create a new requirement on employees to have made any request to work beyond retirement by no later than 4th January 2012. In practice, employees must make such a request (where the employer has given proper notice) between three and six months before the intended retirement date.
Therefore the practical effect of the Regulations is that the 5th April 2011 is the last date for giving notice. No new notices can be given after this date. Also employers will lose the right to give ‘short notice’ from 6th April 2011.
Employers can give between six and twelve months notice of an intended retirement date. The intended retirement date can take affect after 1st October 2011, and in practice, can take effect (in the absence of any agreed extension) at any time up until 5th April 2012.
Employers and employees can agree an extension to the retirement date of either a fixed or an indefinite period. If the period agreed is more than six months from the original intended retirement date, then an employer is required to give a fresh notice of intention to retire. Remember however that employers are not permitted to give any new notices of retirement after 5th April 2011.
This means in practice that employers can agree an extension of a fixed period of up to six months from the intended retirement date without being required to give a fresh notice of intention to retire.
If ABC Ltd gives Joe Bloggs notice to retire on 5th April 2011, and gives the full twelve months’ notice, Joe’s retirement date would be 5th April 2012.
If Joe and ABC Ltd agree an extension for a fixed period of six months, Joe’s retirement could take effect on 5th October 2012.
If Joe requested to work for an indefinite period (or for a period of over 6 months), ABC Ltd are free to agree this, but any retirement in the future will have to be objectively justified.
It is also note worthy that the existing provision which entitles employers to refuse to employ people who are 64 and 6 months (or to reject requests of people who have just been retired) is also revoked from 6th April 2011.
On a final note, the Regulations reflect the position that there is an exemption for employers which permits them to exclude employees who are 65 or over (or, when it increases, the state pension age) from receipt of group-risk insured benefits such as health insurance, life assurance and life cover.
If you have employees who are, or who are approaching 65, and you would like to retire them, we can help you navigate through the new regulations. Contact us through the email addresses below.
The information contained in this newsletter is for general guidance only and represents our understanding of relevant law and practice as March 2011. Wright, Johnston & Mackenzie LLP cannot be held responsible for any action or inaction taken in reliance upon the contents. Specific advice should be taken on any individual matter. Transmissions to or from our email system and calls to or from our offices may be monitored and/or recorded for regulatory purposes. Authorised and regulated by the Financial Services Authority. Registered office: 302 St Vincent Street, Glasgow, G2 5RZ. A limited liability partnership registered in Scotland, number SO 30033