The big question: Should the default retirement age be scrapped?

The Big Question: Should the default retirement age be scrapped?

Manufacturers want to retain a default retirement age that is in line with the age at which employees start to receive their state pension. This will allow employers to make future plans for their workforce, particularly in relation to succession planning, with a greater degree of certainty.

In preparation for the government’s evidence-based review of the default retirement age of 65 in 2010, EEF undertook a survey, sponsored by CPH Consulting, of nearly 500 of its members last spring. The EEF/CPH Consulting Employment Survey 2009 showed most EEF members (68%) support the retention of the default retirement age of 65, with this support being slightly higher in large and medium-sized companies. This level of support is very similar to the response to a survey of members that was conducted in 2004 before the introduction of the default retirement age of 65 as part of the Employment Equality (Age) Regulations in 2006.

Manufacturers have had practical experience of managing the right for employees to request to continue working after 65, which they feel is a useful trigger for discussing employment or retirement plans with their staff. Our survey showed that nearly half of the employees who had reached 65 in the last 12 months had asked to postpone their retirement, with 84% of these requests being accepted by their employer.

This evidence that current arrangements are working well and enabling employers and employees to find mutually-acceptable outcomes should be taken into account by the government in its evidence-based review of the default retirement age of 65.

David Yeandle is head of employment policy at manufacturers’ organisation EEF.

Firstly, when can people afford to retire? It is clear that this will become increasingly later, for all but a lucky few, as money purchase schemes with lower contributions replace more generous salary-related schemes.

Secondly, when do individuals need to retire? This inevitably reflects the person’s physical and/or mental capacity. Manual workers, such as rail track layers, may find it physically impossible to continue into their late 50s. Individuals with less physically or mentally-demanding jobs may well continue into their 70s.

Finally, what are the implications of not having a default retirement age? This issue will become exacerbated as retirement becomes less affordable. Society may consider it acceptable to receive assistance from an older worker in B&Q, but may be reluctant to accept that a train driver, for instance, is still working full-time at 70. Requirements from the Health and Safety Executive may prevent this anyway.

There will be increasing issues for employers around succession planning and employee development if retirement becomes later, because opportunities for younger employees to progress will be hampered.

Forced (default) retirement is necessary, and individuals need to review the options available to them – full retirement, or part or full-time work. The basic state pension, and its payment age, must be affordable for the public purse. Although the payment age must increase, greater flexibility may also be required. In addition to receiving an uplifted pension late, why not an additional option to receive a discounted pension early? It could be argued that we would simply be replacing one state benefit with another.

John Chilman is group reward and pensions director at FirstGroup

The default retirement age – or the age at which employers can lawfully dismiss their employees – is currently 65, although employees have a right to request to delay their retirement which employers must consider.

Currently, men can draw their state pension from age 65 (60 for women until 2010). When the current state pension was introduced in 1948, a 65-year-old man could expect to draw his state pension until his death at an average age of 77. But by 2008, a 65-year-old man could expect to draw it for an extra nine years, until his death at an average age of 86.

Given these significant improvements in life expectancy, it is inevitable that the state pension age will need to rise in the future if the state pension system is to remain affordable. The government has already legislated for the state pension age to rise in a series of steps to 68 by 2046. All three of the major political parties now agree that the state pension age needs to be raised, although there is clearly some disagreement as to by how much and when those changes should happen.

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The government recently announced that it is bringing forward its review of the default retirement age. In a world in which people cannot draw their state pension until age 67 or 68, it seems rather at odds to tell them that their employer can dismiss them at age 65. Perhaps there is a need to rethink whether there is a need for a default retirement age in the modern world at all.

Niki Cleal is director of educational charity the Pensions Policy Institute