Delaying the removal of the default retirement age

The Confederation of British Industry (CBI) has called for the government to delay the removal of the default retirement age, due to fears about the lack of certainty for employers.

The CBI also believes that the laws around unfair dismissal need to be made clearer before the default retirement age is scrapped.

Whilst the default retirement age is set to be abolished in October 2011, because employers must give six months’ notice to staff of enforced retirement, the effective date for it ending is April 2011.

There are good arguments both for and against a default retirement age.

Having a default retirement age of 65 in place gives people a target retirement date. This means that they can plan their finances to a known date in the future.

Removing the default retirement age creates the risk that people will think they can automatically continue working into their old age, putting off retirement income plans accordingly. In practice, some research in 2008 found that three in five people retire before age 65.

Early retirement comes about as a result of a conscious decision or being forced to retire due to ill health or lack of work prospects. In addition, those in physically demanding roles are more likely to retire earlier than age 65.

The CBI call to defer the removal of the default retirement age makes sense, at least until government and other stakeholders have had the opportunity to properly address the various issues it creates around employment law and retirement planning.

Photo courtesy of Flickr/Mesa Royale