Business nervous as Government targets forced retirement

The Government plans to scrap the default retirement age as early as October 2011...

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Last Updated: 31 Aug 2010

The Government's consultation on scrapping the default retirement age at 65, launched today, was entirely predictable, and not just because of the familiar arguments about ageism. After all, if people retire later, it will save the Exchequer a fortune, which is handy when you barely have two gilts to rub together. But for businesses, the new rule (assuming it happens) could make life more difficult - not least because the change is slated for October 2011, giving them just a year and a bit to get their house in order...

There's certainly a compelling argument that the DRA has become an anachronism, given that we're all living longer, healthier lives than we were when it was introduced. Quite rightly, employment law now targets discrimination in all its forms, including age - and yet people can still be forced to retire by their employer once they hit 65, regardless of their health or contribution. For the Government, letting people work longer is a win-win financially, because they keep paying taxes rather than collecting state pensions and benefits - and some studies suggest this boosts the economy overall. And cash-strapped 60-somethings will now have a chance to work longer to build up their retirement nest egg.

But as far as employers are concerned, it's not quite so clear-cut. Ministers claim that scrapping the DRA will benefit businesses because many of these 65-year-olds still have a lot to offer. But firms can still tap into that under the existing rules, by choosing to keep people on beyond 65. What they won't be able to do now is use the DRA for the purposes of 'workforce planning' - i.e. managing people out of the business at no cost. So there's probably a financial implication to these new rules. Others have argued that it will mean young people - already suffering in the recession - will have even less chance of finding a job.

Then again, to employees forced out against their will, this might sound a bit mealy-mouthed. It's certainly hard to justify the DRA on fairness grounds - while the Employers' Forum on Age, a pressure group, reports that several big employers (like Wetherspoons and M&S) have already scrapped it and are reaping the rewards in terms of skills, engagement, and role models. And the change might actually do managers good, since they'll no longer have this easy get-out.

Nonetheless, a big change to the employment regulations like this is still a major headache for companies: they'll have to change the way they operate, which will absorb time and money over the next year - when arguably they'll have more pressing issues to worry about. So we've some sympathy for the view that they should have been given a little longer to get their act together.

In today's bulletin:
Business nervous as Government targets forced retirement

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