News

July 06, 2010

Business groups oppose plans to scrap default retirement age

Government plans to scrap the default retirement age (DRA) will prevent businesses from being able to plan for staff retirements, the Confederation of British Industry (CBI) has warned.

In his recent Budget speech, Chancellor George Osborne announced proposals to start phasing out the current DRA of 65 from April 2011, to allow people to carry on working and save for their pension. Plans to raise the state pension age to 66 for men by 2016 were also announced, with the option of extending it to 70 in the future.

Age campaigners have welcomed the move to abolish the DRA, arguing that too many firms use it as a cost-cutting measure to retire staff, regardless of capability.

However, the CBI said that ending the DRA was unhelpful for employers, as it would impede succession planning and meant businesses would not be able to plan ahead. “Both staff and businesses, especially at small firms, benefit from having a clear framework for the timing of retirement,” said CBI deputy-director general, John Cridland.

The British Chambers of Commerce’s director of policy, Dr Adam Marshall, also opposed the Government’s plans to scrap DRA. “If ministers want to make a positive change, they should either raise the DRA in line with the state pension age or offer employers a new dismissal route that helps businesses manage their staff, regardless of age,” he said.

However, the Employers Forum on Age’s campaign director,
Rachel Krys, said the DRA was “fundamentally discriminatory” and getting rid of it would result in benefits for businesses, such as reduced pension bills and a longer working life for employees.

“Abolishing the DRA completely in October 2011, rather than phasing it out in stages, would give employers time to adapt their policies,” said Krys. “Employers just need to know when it’s going to happen. Upping the age every six months or every year would make things more complex for employers to deal with.”

A recent poll carried out by Saga and the National Endowment for Science, Technology and the Arts (NESTA), found that more than two thirds of people aged 50 or over thought that a DRA was unnecessary, while 60 per cent felt there was not enough support given to them to remain in the workplace after retirement age.