Currently, employers can force staff to retire at the age of
65 regardless of their circumstances and without having to pay any financial
compensation.
Under the government’s consultation proposals, the default
retirement age (DRA) would begin to be phased out from April 2011 and come to
an end by October next year.
Ministers said the move was designed to give people more
choice as they enjoyed longer and healthier lives.
However, with Britain needing to cut public spending to
address a record budget deficit, the move would see people paying tax for
longer.
In January, Britain’s Equality and Human Rights Commission
argued that abolishing the DRA would inject £15 billion ($23.43 billion) into
the economy.
The proposals will also include a review of when the state
pension age should be increased to 66 and to reestablish the link between
earnings and the basic state pension.
“With more and more people wanting to extend their working
lives we should not stop them just because they have reached a particular age,”
said Employment Relations Minister Edward Davey.
“Older workers bring with them a wealth of talent and
experience as employees and entrepreneurs. They have a vital contribution to
make to our economic recovery and long-term prosperity.”
The Employers Forum on Age described the move as “an
incredible leap forward” and said companies had nothing to fear, and firms
which had chosen to get rid of the DRA were reaping benefits.
However, the Confederation of British Industry said the
compulsory retirement age allowed employers to plan for the future and added
the speed of the proposed change left business with little time to prepare.
“Scrapping the DRA will leave a vacuum, and raise a large
number of complex legal and employment questions, which the government has not
yet addressed,” John Cridland, the CBI’s deputy director-general.
“This will create uncertainty among employers and staff, who
do not know where they stand. For employers, these proposals could make
workforce planning and providing some employment benefits, such as critical
illness cover, next to impossible.”
The government said the plans would still make it possible
for certain employers to operate a compulsory redundancy scheme if it could be
justified, citing air traffic controllers and police officers as examples. But
manufacturers’ organization the EEF said the government was giving out
contradictory messages.
“There is also a real danger that it could open a Pandora’s
box with the onus being placed on employers to prove whether older employees
are capable of continuing in their current role,” said David Yeandle, EEF’s
Head of Employment Policy.