New anti-age discrimination law heralds more flexible retirement

A mini-furore broke out last week over fears that the government intends to abolish the compulsory retirement age altogether under wider proposals to outlaw age discrimination in the workplace. Business Europe takes a closer look.

Suspicions that the government is planning to scrap the retirement age first arose this week when employment minister Margaret Hodge told the House of Commons Select Committee on Age Discrimination in Employment that employees should be given greater flexibility and choice over when they retire.

The government plans to achieve this as part of a European Union-wide move to make discrimination in the workplace on grounds of age illegal, she added. Last October, all 15 EU countries agreed to make age discrimination illegal by 2006 at the latest.

Employers in this country have no objection to employing older people. In fact, according to recent research by the charity Age Concern, the majority of employers support ending age discrimination in the workplace, and recognise that older workers' store of experience is a valuable asset.

However, most employers also oppose abolishing the compulsory retirement age, currently set at 65 for men and 60 for women, because they fear that without it, they would be accused of unfair dismissal every time they fired an older worker.

There is a need to raise the level of employment among older workers, given skills shortages and an ageing population. But doing away with contractual retirement ages without consulting employers is not the solution, said Digby Jones, Director-General of the Confederation of British Industry. Flexibility - not a 'one size fits all' solution - has to be the name of the game, he added.

Experts in employment law stress that bosses should be aware of the full legal implications of the proposed new legislation. Chris Davies, solicitor for Hammond Suddards Edge explains: When the legislation is in place, employers will have to go through the same procedures as with any other employee to fire them, otherwise the employee could claim for unfair dismissal.

Another potential outcome is that businesses will effectively be forced into positive discrimination, employing some people because to refuse them a job would be illegal. The legislation will also mean that if a person feels that they were not employed because of their age, they will be able to file a lawsuit just as they could on grounds of sex, race and disability, said Davies.

However, the government is going to have to recognise that certain sectors will be exempt from these provisions. There are material factors that would justify this, for instance Health and Safety legislation has to be taken into account. The public cannot be put at risk, he added.

To date, no concrete plans to abolish retirement have actually been announced. In fact, the limit for women is currently being brought into line with the male limit of 65. However, it is clear that by 2006, compulsory retirement ages will be the exception rather than the norm.

We intend to consult with employers, individuals and expert groups on the implications for retirement ages. Compulsory retirement based on age would have to be objectively justified by a legitimate claim, said a spokesperson for the Department for Employment and Education.

Supporters of the new legislation argue that it will not only protect the employment rights of people over 60, but will also bring about some long-awaited changes in the pensions market.

A spokesperson from Age Concern said: The government is compelled to bring in some sort of legislation. A lot of people are faced with retirement at 65 and cannot financially do this. At Age Concern we hope that this legislation will lead to more flexible retirement options.

Pension providers, meanwhile, hope that scrapping compulsory retirement will simplify pension administration, an area which has become bogged down in red tape in recent years, according to industry sources. Alan Pickering chairman of the National Association of Pension Funds says: The idea of decoupling the state retirement age from an enforced employment retirement age is good, given that state pensions are not enough to live on. It is a nonsense that state retirement age is enmeshed with stopping work. Now people will be able to retire at the pace that suits both the employer and the employee.

By allowing pension schemes to run a few extra years, much of the pressure would be taken out of administering them. Pension schemes will be able to reflect a slow down in work, the pension payments can be phased in as remuneration is phased out, said Pickering.

Moreover, there are now 12 million people over 60. This demographic profile alone dictates that employers will have no choice but to employ an older workforce. According to Age Concern, by 2006 the 55-64 age group will form the largest proportion of the working population - some 24% of the total, or 8.6 million people.

The government has already introduced a Code of Practice on Age Diversity in employment, although less than a third of companies have heard about it. This will also have to change in order to make way for the new legislation.