• Is it time to reintroduce a default retirement age?

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  • 11 Oct 2017
  • Comments 4 comments

Lawyer Karnis Mullings assesses the impact of abolishing the policy, and asks whether, post-Brexit, it should be brought back

We’ve just been through the political party conference season, with the spotlight turning to the party leaders as they strut across auditoriums in Brighton, Manchester and Bournemouth. The latter hosted the first major event for the new Liberal Democrat leader, Sir Vince Cable. Cable’s appointment at the age of 74 means that along with May (60) and Corbyn (68) we now have the oldest set of party leaders since 1955.

The senior age of party leaders has become a trend of late, and in the last 10 years we have seen positive signs of progress in the fight against ageism in the workplace – including the legislation introduced in 2011 to abolish the default retirement age.

Any dismissals on the grounds of an employee reaching retirement age, taking place on or after 1 October 2011, have to be justified under the Equality Act 2010. Employers need to demonstrate that there is a legitimate reason for the dismissal, regardless of whether they decide to keep a fixed retirement age or to retire people on a case-by-case basis.

Six years on, is it now time to review the impact of the legislation?

Retention of employees

A common reason for employees leaving any business is that they cannot see a clear path to success and advancement. For some organisations, an ageing workforce is exacerbating the situation as those further down the pecking order see little hope of development and therefore choose to leave. Organisations that retain older employees, particularly in senior positions, could therefore be smothering the progression opportunities for younger team members. The reintroduction of a default retirement age could help to improve employee retention.  

Succession planning

Some roles require a lengthy training process with employees needing to be in post for several years before being considered fully qualified and competent. The default retirement age gave employers a high level of certainty regarding retirement plans and enabled effective succession planning. Now, employers are left in limbo, unwilling even to instigate conversations about retirement for fear of allegations of age discrimination. Returning to the pre-2011 position would give many employers certainty and enable them to plan for and protect the future of their businesses.

Addressing underperformance

In an ideal world, underperforming employees would be managed proactively. But this doesn’t always happen. The default retirement age provided a fallback in cases of underperformance that, for one reason or another, had not been tackled.  

The default retirement age did not mean that all employees at retirement age were dismissed; employers had the option to retain those who were still adding value. It follows that in the majority of cases, only those whose competency was in doubt, or whose role was no longer required, were at risk of dismissal.

Eliminating the default retirement age has placed more emphasis on performance management. However, managing underperformance costs time and money and, even if handled well, some employees will respond negatively to being informed that they are underperforming. With the protection of a default retirement age removed, organisations risk litigation from aggrieved employees in these cases. In some instances, the threat of an employment tribunal claim can be a safety blanket for incompetency.  

Competence not age

The UK’s ageing population has inevitably led to an ageing workforce. However, an issue arises where organisations do not manage their workforce properly and become overwhelmed by an ageing workforce. The skills and experience that older employees bring needs to be recognised, but we must not allow an ageing workforce to shape the strategy and direction of an organisation.

Ultimately, employees should always be judged on competency and not age, but poor processes and management can lead to a stale workforce that grows old, hampers productivity and haemorrhages talent.

The decision to leave the EU presents an opportunity to shape employment law. Reintroducing a default retirement age should be something up for debate; we need to conduct an honest review of whether it is best for UK plc and its workforce.  

Karnis Mullings is an employment lawyer at Vista

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Comments (4)
  • Great comments so far providing much more insight to default retirement.

    Another option to consider is that if you have well managed and competent older employees along with a competent and progressing younger workforce it provides ample opportunity to expand the organisation. Younger people can still progress and expand in the process.

  • This article is blatant ageism. Suggesting that retirement be used instead of proper management, and addressing management's failing to manage performance instead is a flashback to the past.

    "However, managing underperformance costs time and money and, even if handled well, some employees will respond negatively to being informed that they are underperforming" this is true for a 20 year old as well as a 66 year old, so do we also avoid it for the 20 year olds. The argument that older people hold up the careers of younger makes more sense especially if we had a very high unemployment rate amongst younger people is a better argument (pensions may cost less than benefits plus rent etc for younger people).

  • Before we shoot ourselves in the foot, let's look at the concept that "poor processes and management can lead to a stale workforce that grows old, hampers productivity and haemorrhages [younger] talent". First, the same flaws 'can lead to an inexperienced workforce that lacks context, hampers productivity and haemorrhages older talent'. But, less flippantly, the pension age is rising because people are not just living longer, but are retaining their skills and productivity longer; that is reflected in the changed law. It makes economic sense for people who can work well and pay taxes to fund those older ones, or even older ones, who cannot. Why would you choose to undo that and make more people depend on a smaller workforce, especially now that even private pensions don't stretch as far as they used to?

    The statistics of ageing in UK are interesting: every year from now to about 2030 the number of people of pensionable age depending on every 1,000 people of working age is expected to be significantly less than in 2014. However, by 2034/35 it would be higher than in 2014 and would go on rising. Surely, we should be planning to use the tax money provided by the current, proportionately larger productive workforce over the next 15 years to fund the problem coming at us down the line?

    For context, note: a) that we have a rising employment rate, not a falling one, the highest since 1975; b) that the 'quality' of jobs at the lower income levels is falling; c) that since George Osborne's reforms many more people's incomes have fallen below the threshold to pay any tax, while higher earners pay proportionately more than before; and d) that workers over 60 earn an average of 25% more than those between 18 and 30, have higher 'quality' jobs, and thus pay more tax per head. You could argue that older people are funding younger ones more and more, not the other way round, because they have better jobs, more longevity in those jobs, and can earn more. I'm not saying that is conceptually a good thing, maybe the opposite, but I don't see there is anything to gain by making older people move aside so younger ones can have their 'quality' jobs, since the older ones now have to take the 'low quality' jobs left vacant, and, let's face it, how many over 60/65s are likely to be able to do those jobs? (Possibly this is not the place to get into Brexit and availability of non UK workers.)

    I agree with Karnis's general argument, but let's wait ten or so years post Brexit to implement it, and let both Business and Government do some forward planning in the meantime. And all the people shall say, Amen.

  • Hi Karnis. Interesting point but one of the main reasons why older workers choose not to retire is financial. The issue with re-introducing a default retirement age, particular for older women like me is that, unless it corresponds exactly with the state pension age 66/67, it could force us into five or six years of poverty. I have paid into pension schemes all my life and yet no way could I afford to retire at 60. Like many people in the UK who are not bankers, lawyers etc - it has been difficult to save over the past few years. And now we are still funding the next generation who cannot afford to even rent flat in London and often have insecure jobs. I have so much sympathy with younger workers who feel they cannot progress and yet we older workers cannot afford to leave. How did it come to this?