AGE DISCRIMINATION: TREATMENT OF RETIREMENT AGE
The Secretary of State for Trade and Industry (Patricia Hewitt):
Today my Rt Hon Friend the Secretary of State for Work and
Pensions and I are announcing how we will be implementing the age discrimination
strand of the European Employment Directive (Council Directive 2000/78/EC) in
relation to retirement age.
The Government has made it clear that we are
strongly committed to tackling unjustified age discrimination in employment and
vocational training. We believe that employees, and potential employees, must
be judged on the talents and skills they bring to the workplace, and not on
assumptions or stereotyped views based on their age, or apparent age. During
the last few years, we have turned the tide on a trend that was seeing people
drop out of the labour market before state pension age, and we have also seen
increasing numbers working beyond this age. These are welcome developments that
must continue.
This country cannot afford to squander the skills
and experience workers of any age have to offer, and demographic changes mean
that employers who cut themselves off from a proportion of the skills pool on
the basis of prejudice will lose out. We want to give individuals more choices
about how long they work and when they retire. We have made these points in the
Pensions Green Paper Simplicity, Security and Choice: Working and Saving for
Retirement (December 2002) and in the Age Matters consultation
document on implementing the age discrimination strand of the Directive
(published in 2003), and elsewhere. Our Age Positive campaign has been working
towards this since 1997, and increasingly employers themselves are realising the
benefits of an age diverse workforce.
Arrangements are already in place, or will soon be
in place, that facilitate more flexible approaches to retirement. With the
abolition of the earnings rule in October 1989, the link between retirement and
entitlement to the state pension was removed, and so people can continue working
beyond state pension age and still receive their state pension. Individuals can
also choose to continue working and defer their state pension, and the recent
Pensions Act contains
more generous options for deferral, to be introduced by 2005, including for the
first time, the option of taking a lump sum.
In April 2006, tax rules preventing people from
drawing their occupational pension whilst continuing to work for the same
employer will be abolished.
The age discrimination strand of the Employment
Directive is due to be implemented by autumn 2006 and is an important part of
this process. It will protect individuals against unfair discrimination when
looking for work or in employment terms such as promotion arrangements, just
because they are considered too young or too old.
The treatment of retirement age is an important
aspect of the implementation of this legislation. We have consulted widely on
this issue, both formally and informally, and have listened to a range of
strongly held views. We have carefully balanced the arguments on all sides, and
have decided that the legislation, which will come into force in autumn 2006,
will provide for a national default retirement age of 65 and a right for
employees to request working beyond the set retirement age. The decision to
have a national default retirement age will be reviewed after five years.
In setting the default age, we have taken careful
note of a number of representations we received in the course of consultations
which made it clear that significant numbers of employers use a set retirement
age as a necessary part of their workforce planning. While an increasing number
of employers are able to organise their business around the best practice of
having no set retirement age for all or particular groups of their workforce,
some nevertheless still rely on it heavily.
Furthermore, our consultations have demonstrated
that if all employers only had the option of individually justified retirement
ages at the time the legislation was introduced, this could risk adverse
consequences for occupational pension schemes and other work related benefits.
Some employers would instead simply reduce or remove benefits they offer to
employees to offset the increase in costs.
Until now, companies have been able to set the age
at which their employees retire without any need to justify their choice. So
employees may have had to retire at age 60 or even younger, whether or not they
wished to continue working. Currently only 30% of people are in employment by
the age of 65 and a major part of the response to the ageing society will be for
more people to choose to work to that age.
Following the implementation of this decision, employers will only be able to
set their own retirement age for all or some of their workforce below 65 where
they can objectively justify this. They would be subject to challenge and would
have to show that it was appropriate and necessary to do so.
The default age is not a compulsory retirement age. Employees will be able to
work beyond that age wherever they and their employers agree. Indeed, the
Government welcomes such agreement, and through the right to request is actively
encouraging it.
This decision on retirement age has no direct
implications for occupational or state pension arrangements. The Government has
emphasised that it has no plans to change the state pension age once it has been
equalised for men and women at 65, and we shall continue to provide for pension
schemes to set normal retirement ages if they need to.
The default age will be accompanied by a right for employees who want to
continue to work beyond the default age or their employer’s own justified
retirement age to have their request considered seriously by their employer.
This right will follow the model of the right to request flexible working for
parents with young children, where it has been successful in changing the
culture towards more family friendly working. This policy will ensure that
employers listen to employees who want to keep working and think about whether
they can agree. In doing so, it will help promote a culture change including on
workforce planning and the design of employee benefits, and move towards a
position where fixed retirement ages are relied on only where they can be
objectively justified by the employer.
We will monitor the impact of the default age from the outset. Five years from
implementation we will subject to formal review the question of whether this
remains appropriate. The review will be firmly grounded in evidence, and amongst
other things it will look at relevant data on trends in life expectancy; the
number of individuals working beyond 65; and the impact of the regulations on
business, including the evolution of business practice with respect to the
degree of reliance on retirement ages for workforce planning. If at the point
of the review the evidence suggested that we no longer needed the default
retirement age at 65, we would abolish it.
In reaching this decision, we have taken into
account the responses to Age Matters consultation. An analysis of
those responses is available on the DTI website. at www.dti.gov.uk/er/equality/age.
We have also undertaken extensive consultation with key stakeholders.
We shall consult in summer 2005 on draft regulations
covering the full rights against discrimination on grounds of age in employment
and vocational training. This will include details of the provisions on
retirement age as well as how we propose to tackle the whole range of issues
around age discrimination in recruitment, employment and vocational training.
Subject to that consultation and the approval of Parliament, we will bring the
legislation into force on 1 October 2006.
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