Abolition of the Default Retirement Age

The Government has recently confirmed that the current Default Retirement Age (DRA) of 65, and with it the statutory retirement procedure, will be phased out from 6 April 2011 and completely abolished on 1 October 2011. This means that with effect from 1 October this year employers will no longer be able to rely on the DRA in order to compulsorily retire employees.

The current statutory retirement procedure requires an employer to give an employee at least 6 months' notice of its intention to retire him or her. Therefore, whilst employers are still able to compulsorily retire an employee who reaches the DRA on or before 30 September 2011, they are running out of time in which to do so; 30 March 2011 is the last date on which the required 6 months' notice can be served.

There is the possibility of serving a shorter period of notice on or before 5 April 2011 for a retirement to take effect on or before 30 September 2011, but this will leave employers open to a potential claim for 8 weeks' pay for having failed to serve the full 6 months' notice. These short notice provisions will be abolished with effect from 6 April 2011 and therefore it will no longer be possible to serve notice, short or otherwise, in order to compulsorily retire an employee before 1 October 2011.

Although an employer will still be able to compulsorily retire an employee after 5 April 2010, it will need to be able to objectively justify its reason for doing so in order to avoid falling foul of the Equality Act 2010. There is currently conflicting evidence coming out from the Department for Business, Innovation and Skills and the European courts as to whether this test is likely to be difficult to satisfy and in light of that uncertainty businesses may be well advised to await a UK court ruling on what is capable of amounting to objective justification in this area.

If an employer chooses not to compulsorily retire an employee, it will need to rely on other potentially fair reasons such as capability or redundancy in order to justify dismissal of an employee. Of course, there is nothing to prevent an employee from choosing to retire at any time, and he or she will simply need to serve notice to terminate his or her employment in the normal way.

Many, if not most, contracts of employment state that the employer's normal retirement age is 65 and some contracts state that the employee's employment will terminate automatically on his or her 65th birthday. If an employer is unable to objectively justify having a normal retirement age of 65 then such references should be removed from contracts of employment in order to avoid inferences of age discrimination from being drawn.

If you would like any further advice or guidance on the abolition of the DRA and the actions that you can take now in preparation for the change please contact Katharine Holliday at katharineholliday@hewitsons.comor on 01223 447444.