Pensions 2Before 2011, most employers had a default retirement age in their contracts. The assumption was that most employees would retire at the appropriate age. Sometimes they wanted to stay on, sometimes that would be on reduced hours or similar, but retirement at the set age was the default.

Then in 2011 the default retirement age was abolished. Employers were no longer able to forcibly retire people, or assume they would retire at a set age, and instead whether/when to retire was left completely up to the employee in question.

There were a few implications of that, and although it was a while ago now, it’s worth remembering what those implications are:

Pensions

The repeal of the default retirement age doesn’t impact pensions. In your pension scheme you may have an age at which employees are entitled to start receiving their pension benefits. That is entirely separate from the age at which they stop working.

Fair reasons for dismissal

Retirement used to be one of the potentially fair reasons for dismissal, along with conduct, capability, redundancy, legal restrictions and some other substantial reason. That has now been removed, leaving the other five potentially fair reasons available for employers wishing to dismiss someone.

Age discrimination

As well as retirement not being a fair reason for dismissal, forcing someone to leave employment because of their age would also be discrimination under the Equality Act 2010.

No more coasting

One of the most significant implications of all this in reality has been that employers can’t ‘coast’ towards an employee’s retirement any more. So many times in the past, where there was perhaps an upcoming need for restructuring, or an employee in their early sixties is no longer contributing or performing as they used to or should be, employers would defer restructurings or avoid dealing with problem performance on the basis that the employee would be leaving soon anyway, and the problem would disappear.

The opportunity of upcoming retirement could then be taken to restructure a department, or take a fresh look at roles and responsibilities. Employees not performing well enough could be accommodated, bypassed or excuses made, because who wants to start any unpleasant capability procedure with someone who’s been there 15 years and will be retiring soon anyway?

It is of course right that older employees aren’t discriminated against, but the legal implications of forced retirement have had management implications for employers which aren’t necessarily always positive.

Although generally we don’t advocate avoiding or putting off dealing with problems as a rule, there was something a bit more dignified about allowing an older employee to retire rather than be put through a difficult and stressful restructuring process, or if their performance had slipped or their roles changed, again allowing them to retire rather than raise performance concerns with them and potentially have to dismiss them for poor performance.

If you are concerned that your contracts still contain a retirement age, or want more information about retirement ages, do get in touch.

retirement age