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Benefits of default retirement age are 'exaggerated'

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  • Benefits of default retirement age are 'exaggerated'

UK - The advantages of a mandatory retirement age of 65, implemented under employment equality regulations in 2006, "have been exaggerated", claims research conducted for the Employers Forum on Age (EFA) and The Age and Employment Network (TAEN).

In a survey of 198 HR directors and senior managers, designed to gauge the experience of employers implementing a mandatory retirement age (MRA), 85% confirmed their organisation had an MRA, of which 98% have set it at age 65.

However, the findings of the survey showed that while 81% of firms with an MRA believed it made manpower and succession planning easier, 71% of those without a default retirement age said they experienced no such problems.

In addition, while 80% of employers using an MRA felt it stopped the careers of younger workers from being blocked, two-thirds said they did not believe it helped to improve performance and 53% claimed an MRA had not helped to move on underperforming older employees.

Other findings revealed that 95% of employers with an MRA apply it to all staff, while 10% said they always agree to requests from individual employees to continue working past the MRA, although the majority - 84% - only sometimes agree and 7% never do.

The survey showed 64% of those questioned claimed the biggest disadvantage to a default retirement age is the loss of talent to an organisation, while 74% admitted it had an adverse impact on workers preferring to work past age 65, and 37% suggested it posed risks from demographic factors such as population ageing and declining birth rates.

Meanwhile, of the 29 firms without an MRA, 93% revealed this was a formal policy decision in the organisation, and 78% claimed the move was a positive step as it improved morale and at least 45% said they believed it had improved performance in some way. 

That said, the findings also showed that in those firms without an MRA just 18% said "most" employees work beyond age 65, while 82% admitted "only a few" take advantage of the potential to keep working.

In conclusion, the EFA and TAEN claimed: "Taking these results at face value, it would seem that the advantages of having an MRA have been exaggerated. The benefits of mandatory retirement for employers do not seem in practice to match the claims made by those who wished to see mandatory retirement retained."
 
It argued the survey "undermines the argument that there are strong business benefits in having MRAs" as most respondents agreed its presence "had an adverse impact on employees who want to work on".

The findings follow an announcement by the government earlier this month that it intends to bring forward a review of the default retirement age from 2011 to 2010 in an attempt to respond to the changing demographic and economic circumstances. (See earlier IPE article: Retirement age review may cause DB admin headache)

If you have any comments you would like to add to this or any other story, contact Nyree Stewart on + 44 (0)20 7261 4618 or email nyree.stewart@ipe.com

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