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Employment Law Services Ltd

Retirement

Until the introduction of the Employment Equality (Age) Regulations in 2006 the matter of retirement was one solely determined by the individual’s contract of employment. Employment would end automatically upon reaching the retirement date, i.e. without it amounting to a “dismissal”. The simple fact that an individual reached the age from which he/she was entitled to receive the state pension did not automatically mean that the individual must retire. This was (and to some extent still is) a common misconception. (It would amount to unlawful sex discrimination if an employer insisted on retirement taking effect upon reaching the state pension age, as this will be to the disadvantage of women in the workforce for as long as the pension age differs according to gender. It would also probably amount to unlawful age discrimination to insist that an individual retired at a set age -see comments below).

Before the age discrimination laws came into effect (in 2006) most individuals were unable to bring claims for unfair dismissal if, on or before the termination date of their employment, they had actually reached “normal” retirement age for their role (or if there was no “normal” age, the age of 65). Similarly employees aged 65 or over were not entitled to a statutory redundancy payment if their job was lost because of redundancy. Both of these restrictions have now been repealed.

Old rules on retirement and request to work beyond normal retirement age (2006 to 2011)

For a few years there was in effect a "default" retirement age in the UK. This came about because regulations provided that retirement was (under the regulations) a POTENTIALLY fair reason for dismissal in relation to an employee that had reached 65 years old or more. Any retirement of an employee UNDER the age of 65 amounted to age discrimination (unless it was justified as a proportionate means of achieving a legitimate business aim).

The default retirement age of 65, was challenged in the courts by Heyday (a part of Age Concern). They argued that the UK regulations failed to properly implement the European Equal Treatment Directive, in such a way that did not permit the UK to specify the default retirement age. The European Court of Justice ruled that the default retirement age was not in breach of the Directive if it can be "justified".  



Under the old regulations employees had a statutory right to request to work beyond their expected retirement date. The obligation was placed on the employer to notify them of that right. Should an employer fail to give an employee such notice, an employment tribunal may order that it pay compensation to the employee. The employee could request that he/she continue working indefinitely, or for a fixed period beyond the expected retirement date. The employer was usually required to meet the employee to discuss the request. In the event that the request was rejected the employee had a right to appeal against that decision.

There were fairly strict time limits on each stage of the retirement, the process of requesting to work beyond the expected retirement date, and decision process.

Current situation (2011 onwards)

The "default retirement age" regulations were repealed. However, the previous provisions regarding the loss of the right to claim unfair dismissal and the reduction in the amount of any statutory redundancy payment were NOT re-instated. Instead the current situation is that there is no standard default retirement age in the UK, and it remains a matter for the employer and individual to agree about in each case. "Retirement" is no longer listed as a "potentially" fair reason for dismissal.  

The practical effect is that any retirement dismissal is now unlawful unless it can be objectively justified, ie it would amount to unlawful age discrimination if an employer enforced a set retirement age on its staff without being able to objectively justify it, as well as being able to justify the decision in each particular case. Employers are now required to be able to justify any and all retirement dismissals.

For example, if an employer were to be found to focus disproportionately on taking disciplinary or capability action against older employees it is likely that an Employment Tribunal may consider any resulting dismissal as unfair (there being no upper age limit on being able to bring a claim of unfair dismissal).

Employers may retain a standard retirement age for their staff, but it would be likely to be subject to serious scrutiny by any Employment Tribunal if challenged, and so may be likely to be difficult to enforce in reality.   

It is therefore vital that employers have, and correctly implement fair and reasonable procedures to address this issue. Clearly maintaining an open dialogue with staff about this topic is a sensible way forward for most businesses; and in return it is important for staff to be honest with their employers about their own intentions and abilities. 

Obviously any employee considering retirement ought to check the terms of his/her pension scheme to see how the retirement will affect his/her income.

 

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