Retirement age changes to hit business

The government’s abolishing of the retirement age will squeeze British businesses and could lead to ‘more unpleasant and costly legal action’, says the CBI.

Changes to the Default Retirement Age (DRA), made by the government to improve workplace flexibility and increase the number of taxpaying workers, will mean from April this year employers will no longer be allowed to dismiss staff automatically when they turn 65.

CBI director general John Cridland says the government’s decision will have a clear impact on businesses, particularly small and medium-sized enterprises, and does not leave enough time for them to put new procedures in place. He adds that the problem will be more acute in physically demanding jobs, with the burden placed on employers to demonstrate that an employee can no longer carry out the work.

Cridland continues: ‘The impact on employers, especially smaller ones, will be considerable. There is not enough clarity for employers on how to deal with difficult questions on performance.

‘Less than three months is not enough time for businesses to put in place new procedures. The outcome will be more unpleasant and costly legal action.’

However, Jane Mulford, pension specialist at NFU Mutual, supports the decision to scrap the DRA, which she says allows greater financial flexibility.

Mulford comments: ‘Older workers who are in good health and want to work for longer will be able to continue to contribute to pensions and retirement savings, helping them to maintain a similar standard of living in later years.’

Chartered Management Institute policy and research director Louise Brooker-Carey also backs the legislation change, saying older workers were being discriminated against under the old rules.

Brooker-Carey says: ‘For too long, age has been used by some managers as a substitute for performance management, which is unfair and discriminatory. With employers still reporting skills gaps in key areas, it’s right to tackle any barriers that discourage talented, skilled employees from continuing to make a contribution.’

From 6 April, businesses will not be able to issue any notifications for compulsory retirement using the DRA procedure. Between 6 April and 1 October, only people who were notified of their retirement before 6 April and whose retirement date falls before 1 October can be compulsorily retired using DRA. After 1 October, employers will be unable to use DRA to retire their staff.

Nick Britton

Nick Britton

Nick was the Managing Editor for when it was owned by Vitesse Media, before moving on to become Head of Investment Group and Editor at What Investment and thence to Head of Intermediary...

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