Pressure grows for abolition of default retirement age
UK - A cross-party group of MPs has reiterated its call for the default retirement age of 65 to be abolished, as it believes the practice is "discriminative and unnecessary".
The 11 members of the Work and Pensions Select Committee noted in a report entitled 'Tackling Pensioner Poverty' that while no pensioner should be expected to work after the age of 65, many would like to.
It argued: "People working beyond 65 will become the norm as the state pension age is progressively increased. Employment for those over state pension age provides the opportunity to supplement income from state and private pensions. Employment up to state pension age provides an opportunity for many to increase their retirement income."
The default UK retirement age, included in the Equality regulations in 2006, currently allows employers to enforce mandatory retirement on workers at the age of 65 although they must consider requests from employees to continue working.
The use of a mandatory retirement age has been the subject of an ongoing legal action - known as the 'Heyday' case - brought By Age Concern and Help the Aged on the basis that it is discriminatory against older workers, and the case is currently being heard by the UK High Court following an ECJ ruling in March. (See earlier IPE article: ECJ passes Heyday case back to UK High Court)
In a May inquiry into the Equality Bill, the Work and Pensions Committee called for the government to abolish the default age, and although at the time the government claimed the measure would not be reviewed until 2011, it confirmed ealier this month that it intends to bring forward the review to 2010. (See earlier IPE articles: MPs say 'abolish' default retirement age and Retirement age review may cause DB admin headache)
In the latest report, the Committee highlighted evidence suggesting employers which have already removed the default age tends to lead to staff delaying retirement for one or two years - a move which it claimed would "not have a disproportionate effect on the labour market".
In contrast, it noted, working an extra year could allow someone deferring their claim to the basic state pension to add more than 10% to the value of the state pension for the rest of their life, and a deferral of two years would add over 20%, impacting significantly on rates of pensioner poverty.
MPs argued they were not convinced the benefits to business of greater certainty in staff planning, resulting from a default retirement age, "outweigh the broader need for more people to be enabled to extend their working lives"; a conclusion echoed by recent research from the Employers Forum on Age (EFA) and The Age and Employment Network (TAEN). (See earlier IPE article: Benefits of default retirement age are 'exaggerated')
The committee added: "We reiterate our conclusion from our report on the Equality Bill that the default retirement age contradicts the government's wider social policy and labour market objectives of raising the average retirement age and allowing people to continue to work and save for their retirement."
It acknowledged the government's decision to bring forward the review of the measure but pointed out "the evidence we have received suggests that it is discriminatory and unnecessary. We look forward to it being abolished".
Terry Rooney MP, chairman of the committee, added: "The default retirement age is discriminatory, is bad for society, bad for older people, and bad for the economy. It has to go."
That said, Rachel Vahey, head of pensions development at Aegon UK, pointed out: "If you remove it, you also remove one those big prompts for people to think about their retirement, their needs and what type of retirement income they want".
She added were the default retirement age abolished, employers would have to consider the implications.
"It will still be in people's psyche that they will retire at 65," said Vahey. "Providing a decent workplace pension for workers may become more important to help them build sufficient retirement savings, to give [employees] the flexibility to retire when they want to, rather than feel they are forced to work later."
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