The end of the line for retirement ages
The business case for managing without a retirement age
The arguments for removing retirement age are compelling on every level. From a political, economic and business perspective it is clear neither government nor employers can afford to waste the talent of older workers.
The experience of employers who have already successfully managed to remove a set retirement age puts the final nail in the coffin. How can business argue it needs to maintain the right to retire people, when so many organisations clearly don't? The experiences of leading EFA employers will inevitably be cited by Government, lawyers and others, as a clear indicator that employers don't need a retirement age to be competitive.
The EFA's business case for managing without a retirement age is based on the experiences of HR and Diversity practitioners within the EFA membership. It sets out the arguments you need to make to get retirement policy back on the agenda and succeed in convincing your organisation removing retirement age is the next logical step on the diversity journey.
Click here to download the full report
Because retirement is a complex subject and good practice is constantly evolving, we encourage readers to refer back to this webpage for updates on the legal position and more information on what employers are doing.
Further information
Guidance on moving towards no retirement age
Whilst the EFA are keen to encourage all employers to remove retirement age as quickly as possible, we recognise that it may take organisations some time to change minds and policy.
Click here to find further information and guidance on preparatory steps in moving towards managing without a retirement age.
Saying yes/saying no
For as long as you maintain a fixed retirement age it is crucial that you operate the retirement process fairly and consistently.
Click here to find the EFA's advice on the critical issue of 'saying yes or no' to requests to work past retirement age.
The full B&Q story
The experiences of EFA members who have dispensed with a set retirement age are summarised in the report and may well guide you in the approach you wish to take. To amplify these summaries, further information about B&Q's experience can be found here.
Frequently Asked Questions
For the sake of brevity only a sample of questions are covered in the report. The following FAQs should go some way to answering any further questions or concerns you have. As we learn more about what employers are doing and as case law and best practice develop, this page will be updated.
What are the legal challenges to a set retirement age and what are the implications for UK employers?
Where can I find more information about demographic trends in the UK, Europe and elsewhere?
I’m still a bit confused about what flexibility in pensions is now allowed under HMRC rules – can you tell me more?
What difficulties does flexible retirement give employers?
What are the key steps in the Retirement Process and the time limits involved?
We provide a group income protection scheme and other similar insured benefits for our employees – what implications do the age regulations have for these arrangements?
What sort of management information should I put together to help persuade colleagues to remove our fixed retirement age?
Should we have a written retirement policy and what should it contain?
How are UK employers tackling skills issues?
Where can I find more information about pre-retirement planning?
What are the legal challenges to a set retirement age and what are the implications for UK employers?
The legitimacy of nationally-set retirement ages is already under legal challenge. Two referrals from Spanish courts are pending decision in the ECJ. In the UK the Heyday judicial review challenge to compulsory retirement was adjourned in December 2006 on the basis that an agreed set of questions will in due course also be referred to the ECJ - delays in this process mean that a judgment may not be forthcoming until 2009.
Whilst decisions in these cases are not imminent, the Advocate General's opinion in the Palacios de la Villa case was delivered in February 2007. This case is likely to be brought before the ECJ later in 2007: opinions of the AG are not binding but are mostly followed by the court. In this instance the AG concluded that a national provision for setting a mandatory retirement age does not fall within the scope of the Framework Directive 2000/78.
Although some of the technical issues will differ, the case is likely ultimately to undermine the Heyday contention that the UK default retirement provisions run counter to European law. Until then, public sector employers have potential exposure to claims from employees retired against their will at age 65, but any claims on this issue reaching the Employment Tribunal are likely to be stayed pending the ECJ ruling.
back to top
Where can I find more information about demographic trends in the UK, Europe and elsewhere?
In almost too many places! There is a wealth of data about demographic trends, and you will need to hone the information you present depending upon the argument you are putting forward.
The EFA provides a selection of age related data here, and the Office of National Statistics provides UK population data at both national and local level. DWP, and in particular Age Positive, is also a handy source: the latest DWP statistical booklet on older workers can downloaded here.
Information with an European focus is available from Eurostat (look initially for the Eurostat Yearbook) and OECD produces a wide range of information on trends in population and migration (look for Statistics). For a global perspective, the June 2007 UN report Development in an Ageing World presents comprehensive information on the economic and social impact of ageing and can be downloaded here.
back to top
I'm still a bit confused about what flexibility in pensions is now allowed under HMRC rules - can you tell me more?
The complex set of tax rules relating to occupational pension schemes was rationalized from 6 April 2006 - "A-Day". The main changes introduced were:
back to top
What difficulties does flexible retirement give employers?
The pensions simplification introduced by HMRC in 2006 allows an employee to draw pension whilst remaining in employment with the same employer, meaning that there are now much greater possibilities for flexibility in retirement beyond the all or nothing of the historic "cliff edge" approach.
Many employers limit the total amount payable in such circumstances (the combination of wage/salary and pension benefit), normally to the level of employment income earned by the employee immediately before retirement.
The main difficulty facing employers centres on the basis on which employees can continue to accrue pension benefits in a non-discriminatory manner.
The DWP report, Flexible Retirement: snapshot of employer practices, provides further detail and is available here. Follow the link for "flexible retirement and pensions". Additional research by the University of Kent is available from the Joseph Rowntree Foundation and in a later paper.
back to top
What are the key steps in the Retirement Process and the time limits involved?
A flow chart showing the detail of the retirement process can be found here and members can sign in to download model letters.
back to top
We provide a group income protection scheme and other similar insured benefits for our employees - what implications do the age regulations have for these arrangements?
Employers face three discrimination problems arising out of the impact of the age regulations on these benefit schemes:
The DTI has so far resisted the call to provide exemptions to facilitate the continued operation of such benefits by employers on an economically sound basis underpinned by actuarially determined age-related limits. This is despite the fact that the Sex Discrimination Act provides a similar exemption for sex related discrimination in insurance and that similar age related discrimination in permitted in jurisdictions such as Ireland and Canada.
The Government's position is rendered rather perverse by its acknowledgment that, if legislation is extended to outlaw age discrimination in the provision of goods and services, an exemption will be necessary in relation to insurance providers.
back to top
What sort of management information should I put together to help persuade colleagues to remove our fixed retirement age?
Managers who have successfully persuaded their senior team colleagues to make this decision have had at their finger tips a clear picture of the business and have not relied upon theoretical or emotional arguments for diversity or equality. Presenting a robust business case might incorporate the following metrics:
Should we have a written retirement policy and what should it contain?
Having a written retirement policy has a number of benefits: it will clarify the obligations and responsibilities of the employer as well as the employee's rights. If framed correctly it will also assist in demonstrating legal compliance and rebutting any inference that retirement is age discriminatory.
For employers with no retirement age, the policy may need simply to define that:
The scope of the policy needs to be much broader for employers maintaining a set retirement age. Here the policy should include, for example:
How are UK employers tackling skills issues?
The UK has historically lagged behind its major competitors in providing appropriate adult skills training, with the resulting skills deficit having a consequent negative impact on productivity. The Leitch Review of Skills report sets out ambitious targets to redress this, with implications for employers as both customers for, and providers of, workforce training. Over 150 employers have committed to the Government's related skills pledge.
Research by the National Institute of Adult Continuing Education (NIACE) in 2007 highlighted workers' preferences for informal on the job training and showed that workers over the age of 50 felt greater responsibility for their own development compared to other age groups. Evidence from the EFA's 'Age at Work' research (2005) confirmed that workers over 40 received reduced levels of training than other (younger) workers.
back to top
Where can I find more information about pre-retirement planning?
Many employers provide life planning support to employees who are approaching retirement, and appropriate programmes can often be put in place at low cost using employee benefits consultants, pension scheme advisers and similar resources. As an alternative, Life Academy, an educational charity which traces its origins from the Pre-Retirement Association, provides both public and tailored in-house programmes: further information can be found here.
back to top
The business case for managing without a retirement age
The arguments for removing retirement age are compelling on every level. From a political, economic and business perspective it is clear neither government nor employers can afford to waste the talent of older workers.
The experience of employers who have already successfully managed to remove a set retirement age puts the final nail in the coffin. How can business argue it needs to maintain the right to retire people, when so many organisations clearly don't? The experiences of leading EFA employers will inevitably be cited by Government, lawyers and others, as a clear indicator that employers don't need a retirement age to be competitive.
The EFA's business case for managing without a retirement age is based on the experiences of HR and Diversity practitioners within the EFA membership. It sets out the arguments you need to make to get retirement policy back on the agenda and succeed in convincing your organisation removing retirement age is the next logical step on the diversity journey.
Click here to download the full report
Because retirement is a complex subject and good practice is constantly evolving, we encourage readers to refer back to this webpage for updates on the legal position and more information on what employers are doing.
Further information
Guidance on moving towards no retirement age
Whilst the EFA are keen to encourage all employers to remove retirement age as quickly as possible, we recognise that it may take organisations some time to change minds and policy.
Click here to find further information and guidance on preparatory steps in moving towards managing without a retirement age.
Saying yes/saying no
For as long as you maintain a fixed retirement age it is crucial that you operate the retirement process fairly and consistently.
Click here to find the EFA's advice on the critical issue of 'saying yes or no' to requests to work past retirement age.
The full B&Q story
The experiences of EFA members who have dispensed with a set retirement age are summarised in the report and may well guide you in the approach you wish to take. To amplify these summaries, further information about B&Q's experience can be found here.
Frequently Asked Questions
For the sake of brevity only a sample of questions are covered in the report. The following FAQs should go some way to answering any further questions or concerns you have. As we learn more about what employers are doing and as case law and best practice develop, this page will be updated.
What are the legal challenges to a set retirement age and what are the implications for UK employers?
Where can I find more information about demographic trends in the UK, Europe and elsewhere?
I’m still a bit confused about what flexibility in pensions is now allowed under HMRC rules – can you tell me more?
What difficulties does flexible retirement give employers?
What are the key steps in the Retirement Process and the time limits involved?
We provide a group income protection scheme and other similar insured benefits for our employees – what implications do the age regulations have for these arrangements?
What sort of management information should I put together to help persuade colleagues to remove our fixed retirement age?
Should we have a written retirement policy and what should it contain?
How are UK employers tackling skills issues?
Where can I find more information about pre-retirement planning?
What are the legal challenges to a set retirement age and what are the implications for UK employers?
The legitimacy of nationally-set retirement ages is already under legal challenge. Two referrals from Spanish courts are pending decision in the ECJ. In the UK the Heyday judicial review challenge to compulsory retirement was adjourned in December 2006 on the basis that an agreed set of questions will in due course also be referred to the ECJ - delays in this process mean that a judgment may not be forthcoming until 2009.
Whilst decisions in these cases are not imminent, the Advocate General's opinion in the Palacios de la Villa case was delivered in February 2007. This case is likely to be brought before the ECJ later in 2007: opinions of the AG are not binding but are mostly followed by the court. In this instance the AG concluded that a national provision for setting a mandatory retirement age does not fall within the scope of the Framework Directive 2000/78.
Although some of the technical issues will differ, the case is likely ultimately to undermine the Heyday contention that the UK default retirement provisions run counter to European law. Until then, public sector employers have potential exposure to claims from employees retired against their will at age 65, but any claims on this issue reaching the Employment Tribunal are likely to be stayed pending the ECJ ruling.
back to top
Where can I find more information about demographic trends in the UK, Europe and elsewhere?
In almost too many places! There is a wealth of data about demographic trends, and you will need to hone the information you present depending upon the argument you are putting forward.
The EFA provides a selection of age related data here, and the Office of National Statistics provides UK population data at both national and local level. DWP, and in particular Age Positive, is also a handy source: the latest DWP statistical booklet on older workers can downloaded here.
Information with an European focus is available from Eurostat (look initially for the Eurostat Yearbook) and OECD produces a wide range of information on trends in population and migration (look for Statistics). For a global perspective, the June 2007 UN report Development in an Ageing World presents comprehensive information on the economic and social impact of ageing and can be downloaded here.
back to top
I'm still a bit confused about what flexibility in pensions is now allowed under HMRC rules - can you tell me more?
The complex set of tax rules relating to occupational pension schemes was rationalized from 6 April 2006 - "A-Day". The main changes introduced were:
- Many existing tax regimes replaced by one
- No limits on retirement savings
- No limits on total benefits
- Two key controls - annual allowance and a lifetime allowance
- From April 2010, pensions can't be taken before age 55
- Directors and employees no longer have to retire before taking a pension
back to top
What difficulties does flexible retirement give employers?
The pensions simplification introduced by HMRC in 2006 allows an employee to draw pension whilst remaining in employment with the same employer, meaning that there are now much greater possibilities for flexibility in retirement beyond the all or nothing of the historic "cliff edge" approach.
Many employers limit the total amount payable in such circumstances (the combination of wage/salary and pension benefit), normally to the level of employment income earned by the employee immediately before retirement.
The main difficulty facing employers centres on the basis on which employees can continue to accrue pension benefits in a non-discriminatory manner.
The DWP report, Flexible Retirement: snapshot of employer practices, provides further detail and is available here. Follow the link for "flexible retirement and pensions". Additional research by the University of Kent is available from the Joseph Rowntree Foundation and in a later paper.
back to top
What are the key steps in the Retirement Process and the time limits involved?
A flow chart showing the detail of the retirement process can be found here and members can sign in to download model letters.
back to top
We provide a group income protection scheme and other similar insured benefits for our employees - what implications do the age regulations have for these arrangements?
Employers face three discrimination problems arising out of the impact of the age regulations on these benefit schemes:
- Providing cover where it is not available from insurers
- Paying significantly increased premiums if older, particularly 65+, employees, are covered
- Operating a flexible benefits scheme with fluctuating age-related costs.
The DTI has so far resisted the call to provide exemptions to facilitate the continued operation of such benefits by employers on an economically sound basis underpinned by actuarially determined age-related limits. This is despite the fact that the Sex Discrimination Act provides a similar exemption for sex related discrimination in insurance and that similar age related discrimination in permitted in jurisdictions such as Ireland and Canada.
The Government's position is rendered rather perverse by its acknowledgment that, if legislation is extended to outlaw age discrimination in the provision of goods and services, an exemption will be necessary in relation to insurance providers.
back to top
What sort of management information should I put together to help persuade colleagues to remove our fixed retirement age?
Managers who have successfully persuaded their senior team colleagues to make this decision have had at their finger tips a clear picture of the business and have not relied upon theoretical or emotional arguments for diversity or equality. Presenting a robust business case might incorporate the following metrics:
- Local and, if appropriate, national demographic and employment figures
- Customer profiles
- Age profiles of the whole business, different business units, functions etc
- Recruitment data, linked to skill shortages, recruitment times and costings
- Staff turnover analysed by age and by cost
- Absence figures by age
- Performance data
- Engagement or staff survey analysis by age
- Flexible working take up
- Exit analysis information
- Future age profiles - what the business will look like in the short & medium term
- Future skills needs projections
Should we have a written retirement policy and what should it contain?
Having a written retirement policy has a number of benefits: it will clarify the obligations and responsibilities of the employer as well as the employee's rights. If framed correctly it will also assist in demonstrating legal compliance and rebutting any inference that retirement is age discriminatory.
For employers with no retirement age, the policy may need simply to define that:
- there is no set age at which the employer will seek to terminate employment through retirement, and
- employees may resign (request to retire) at any age with pension benefits payable in accordance with the rules of the pension scheme, subject to the employer's consent if required.
The scope of the policy needs to be much broader for employers maintaining a set retirement age. Here the policy should include, for example:
- The employer's normal retirement age
- Provisions applying to any flexible retirement options
- Early retirement on grounds of redundancy or ill-health
- The statutory Retirement Process (and any contractual enhancements to the process agreed by the employer)
- Policy on working past the retirement age
How are UK employers tackling skills issues?
The UK has historically lagged behind its major competitors in providing appropriate adult skills training, with the resulting skills deficit having a consequent negative impact on productivity. The Leitch Review of Skills report sets out ambitious targets to redress this, with implications for employers as both customers for, and providers of, workforce training. Over 150 employers have committed to the Government's related skills pledge.
Research by the National Institute of Adult Continuing Education (NIACE) in 2007 highlighted workers' preferences for informal on the job training and showed that workers over the age of 50 felt greater responsibility for their own development compared to other age groups. Evidence from the EFA's 'Age at Work' research (2005) confirmed that workers over 40 received reduced levels of training than other (younger) workers.
back to top
Where can I find more information about pre-retirement planning?
Many employers provide life planning support to employees who are approaching retirement, and appropriate programmes can often be put in place at low cost using employee benefits consultants, pension scheme advisers and similar resources. As an alternative, Life Academy, an educational charity which traces its origins from the Pre-Retirement Association, provides both public and tailored in-house programmes: further information can be found here.
back to top
