No more forced retirement
A consultation published by the government this week should result in the default retirement age being phased out.
The plans to end compulsory retirement at age 65 are contained with a consultation document called Phasing out the Default Retirement Age. This was published by the Department for Business, Innovation & Skills (BIS).
The proposals to phase out the default retirement age will result in it being abolished by October 2011. The phasing out will begin in April 2011.
Under current rules, employers can force their staff to retire at age 65, regardless of their circumstances. An employer needs to give a minimum of six months notice of retirement.
The consultation remains open until October and comes at the same time as the government makes plans to increase the State pension age, initially to age 66.
Assuming the proposals go ahead, it will be the first time that those over age 65 years have full employment rights.
Employers will need to give careful consideration to the proposals, looking at the impact on employment legislation and related issues such as employee benefits.
Abolishing the default retirement age makes it more challenging to plan for retirement, so individuals will need to determine their own planned retirement age and align their retirement income plans accordingly.
Whilst the legal right to work beyond age 65 is a positive move, it is important to recognise that it may not be physically possible for everyone to achieve this, particularly in some types of work.
Poor health, sometimes caused by work-related factors, is often a cause in forcing early retirement. Planning to provide an income in retirement from a reasonable age remains an essential part of financial planning.