Out with old? FAQs on the repeal of the DRA

The default retirement age is being pensioned off this year and employers have not been given much time to prepare.  Nicola Stibbs answers ten frequently asked questions about the repeal of the default retirement age, which is being phased out from April.

If you would like to receive a detailed Bevan Brittan briefing note on the repeal of the DRA and how to prepare for the changes ahead, please email here to receive a copy.

In this article

• Why is the government making this change?
• When will the default retirement age be repealed?
• What happens to employees who have already been notified of their retirement?
• Will ‘retirement’ still be a ‘fair reason’ for dismissal?
• Can we still limit access to insurance benefits for employees who are over a particular age?
• Will it still be possible for our pension scheme to specify a ‘normal retirement age’?
• Can employees still voluntarily retire after the DRA has been repealed?
• Can we retain a set retirement age for specific roles?
• Can we dismiss older employees who are struggling and would be ‘better off’ retiring?
• Is there any official guidance on dealing with this change?

 

Why is the government making this change?

According to the government’s response to its consultation on repeal of the default retirement age (DRA), these proposals are being implemented because working longer is “good for the economy, for society and for individuals”.    According to BIS, if everyone worked a year longer, our annual GDP would grow, it is estimated, by £13billion.

It is also thought that having an arbitrary set age at which individuals will retire is something of a ‘blunt tool’ – why should someone who is perfectly capable of doing their job on a Friday, be dismissed on the following Monday because they turned 65 over the weekend?

When will the default retirement age be repealed?

Subject to parliamentary approval, the Employment Equality (Repeal of Retirement Age) Regulations 2011 will come into force on 6 April 2011, and will repeal the default retirement age, and all associated retirement procedures. 

What happens to employees who have already been notified of their retirement?

Retirements already in train may continue, but only on the basis that

• notification of retirement is issued prior to 6 April 2011;
• the employee in question reaches the age of 65 / other normal retirement age between 6 April 2011 and 30 September 2011; and
• all the requirements of the statutory retirement procedures are followed.

Therefore, any retirement that has been notified to an employee who turns 65 before 6 April 2011 and is due to retire after 6 April 2011, will be unlawful.

Any retirement which has already been notified and does not comply with the new regime, will need to be withdrawn and re-issued.

Will ‘retirement’ still be a ‘fair reason’ for dismissal?

No.  ‘Retirement’ will be removed from the list of potentially fair reasons for dismissal, set out in section 98 of the Employment Rights Act 1996.

Can we still limit access to insurance benefits for employees who are over a particular age?

Yes.  There will be an exemption carved out in the Regulations for group risk insured benefits, such as income protection, life assurance and sickness and accident insurance, and private medical cover.   Therefore, for example, once the Regulations are in force, you may limit membership of your private health insurance cover to employees under the age of, say, 65.  The government believes that this exemption is necessary in order to discourage employers from withdrawing such benefits from all employees, on the basis of cost.

Will it still be possible for our pension scheme to specify a ‘normal retirement age’?

Yes. The repeal of the DRA will not affect the setting of a ‘normal retirement age’ for the purposes of occupational pension schemes.

Can employees still voluntarily retire after the DRA has been repealed?

Yes. The government has confirmed that there will be nothing to prevent employees voluntarily ‘retiring’ by choice, after the repeal of the default retirement age.   Legally, this would be a resignation; albeit that employees may still refer to the term ‘retirement’ when referring to a decision to leave their employment with the intention of stopping work permanently and / or to draw down their occupational pension.

Can we retain a set retirement age for specific roles?

A set retirement age will be unlawful unless is ‘objectively justified’ - i.e. a proportionate means of achieving a legitimate aim.  Employers who wish to retain a set retirement age will have the option of establishing an Employer Justified Retirement Age, or ‘EJRA’.  Both the Acas guidance on Working Without the DRA and the government’s response to its consultation on repeal of the DRA has stated that it will be difficult for employers to justify an EJRA.  In the Acas guidance, examples of roles that might attract a valid EJRA are air traffic controllers and posts within the emergency services which may require a high level of physical fitness.  An EJRA can be any age, as long as it is justified, but it will not be possible to obtain prior approval of an EJRA. Their validity will only be tested if an employee decides to bring a claim, and tribunals will rule on justification of EJRAs on a case by case basis. A set retirement age which is not an EJRA (whether discretionary or compulsory) will, on the face of it, be discriminatory unless it can be objectively justified.

Can we dismiss older employees who are struggling and would be ‘better off’ retiring?

If you were to dismiss for these reasons, after the time limit for using the DRA procedure has expired, then you would run the risk of an age discrimination claim.  The dismissal would then need to be justified objectively, in that it would need to be an objective means of achieving a legitimate aim.

Once the DRA has been repealed, employees who are ‘struggling’ should be managed out of employment using a performance / capability procedure, that is applied consistently to all staff, regardless of their age, rather than ‘retired’.  Whilst the temptation may be to take the ‘softer’ route of ‘retiring’ an older employee who is struggling with work, this would run the risk of an age discrimination claim.  It is, therefore, important to focus on the true reason for a dismissal, even if this might mean having a difficult discussion with the employee in question.

Is there any official guidance on dealing with this change?

There will be no statutory code of practice on ‘retiring’ employees after the repeal of the default retirement age, but Acas has produced non-statutory guidance,Working Without the DRA .  As it is non-statutory, an employment tribunal may take this into account in reaching a decision, but will not be obliged to do so, and non-compliance will not result in an uplift to any award of compensation.   The Department for Work and Pensions has also produced non-statutory guidance on managing without the DRA.