Compulsory retirement at 65 to be abolished

The Government is to press ahead with plans to end compulsory retirement at 65 despite calls from business for the move to be delayed, it was announced today.

The employment relations minister Ed Davey said the abolition of the default retirement age was "great news for older people, great news for business and great news for the economy".



He dismissed warnings that allowing employees of pensionable age to stay in work would make it more difficult for young people to find jobs, insisting that the change will boost the economy and enlarge the size of the labour market.



"Older workers have a lot to offer in the workplace and it's time we got rid of this outdated form of age discrimination," said Mr Davey.



"We will do all we can to support businesses with the change."



Age campaigners have long called for the abolition of the default retirement age, which fulfils a pledge in the Government's coalition agreement.



But while less than a third of firms still insist on people leaving on their 65th birthday, there are concerns among business leaders about the change.



The Institute of Directors has criticised the move - featured in both the Conservative and Liberal Democrat election manifestos - for reducing flexibility for employers.



Mr Davey said today that guidelines would make clear that employers will still be able to conduct performance appraisals and fairly dismiss staff found to be no longer capable of doing their jobs effectively.



He told BBC Radio 4's Today programme: "While there are some costs to business - and we have looked at them very carefully and listened to business - I think this is really beneficial and should not be the problem some people suggest."



There are already around 850,000 workers aged over 65 in the UK, and there is no evidence that productivity declines after that age, said Mr Davey.



"Many older people have skills and a huge contribution to make to businesses and those businesses that have got rid of fixed retirement ages find it very beneficial," he said. "They have seen it boost their business, not have a negative effect.



"People are living longer, having healthier lives and they have a lot to contribute."



Asked whether allowing older people to stay on in work would reduce the number of jobs available to younger workers, Mr Davey replied: "The opposite is the case. Because of this policy, the evidence suggests that there will be an increase in the number of workers in the workforce.



"That will boost the economy, increasing GDP, increasing tax revenue. Evidence internationally shows more people in the labour market means more activity, more income, more growth.



"Those people who seem to think there is a displacement between young people and older people are not reading the evidence and have a very old-fashioned approach to labour supply, as if there is a fixed amount of jobs in the economy. That clearly isn't the case."



Officials said the change will be phased in between April and October to allow firms to ready themselves and amend their human resources policies.



The announcement coincides with the publication today of the Pensions Bill, which includes raising the state pension age to 66, as announced by Chancellor George Osborne in last October's spending review.



Companies are also to be required to enrol their staff in pension schemes automatically, a move expected to force employers to reduce their contributions for existing members.



Pensions expert David Robertson, of the Association of Consulting Actuaries, said research indicated that many large companies were considering "levelling down" their contributions as a response to auto-enrolment.



He said: "A lot of big firms are looking at levelling down their contributions because they are looking at paying contributions for a lot more employees."



Rachel Krys, campaign director of Employers Forum on Age (EFA), said the move was a "pragmatic response to the increasing calls for change".



She said: "Business performance will improve when employees are used to their full potential, managed throughout their careers and not cast aside as they enter their 60s or encouraged to coast towards retirement.



"A new approach to retirement which enables individuals to work as long as they are making a valuable contribution, and protects employers' ability to provide insurance and benefits, is a pragmatic response to the increasing calls for change.



"Growing numbers want to and have to work beyond 65. Outdated policies which prevent this group working increase the burden on the already creaking state pension provision and ignores the fact that we are living longer and healthier lives.



"Employers without retirement ages experience a greater focus on performance, a reduction in recruitment costs and the retention of talent, whatever the age."

Start your day with The Independent, sign up for daily news emails
Have you tried new the Independent Digital Edition apps?
ebooks
ebooksA special investigation by Andy McSmith
  • Get to the point
2015 General Election
May2015

Poll of Polls

Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs General

Recruitment Genius: Assistant Property Manager

£15000 per annum: Recruitment Genius: Are you looking for your first step into...

Recruitment Genius: Mechanical Design Engineer

£25000 - £40000 per annum: Recruitment Genius: This innovative company working...

Recruitment Genius: Car Sales Executive - OTE £36,000

£12500 - £36000 per annum: Recruitment Genius: This established Wakefield Deal...

Recruitment Genius: PHP Web Developer / Full Stack Developer

£24500 - £28000 per annum: Recruitment Genius: This is an exciting opportunity...

Day In a Page

General Election 2015: The masterminds behind the scenes

The masterminds behind the election

How do you get your party leader to embrace a message and then stick to it? By employing these people
Machine Gun America: The amusement park where teenagers go to shoot a huge range of automatic weapons

Machine Gun America

The amusement park where teenagers go to shoot a huge range of automatic weapons
The ethics of pet food: Why are we are so selective in how we show animals our love?

The ethics of pet food

Why are we are so selective in how we show animals our love?
How Tansy Davies turned 9/11 into her opera 'Between Worlds'

How a composer turned 9/11 into her opera 'Between Worlds'

Tansy Davies makes her operatic debut with a work about the attack on the Twin Towers. Despite the topic, she says it is a life-affirming piece
11 best bedside tables

11 best bedside tables

It could be the first thing you see in the morning, so make it work for you. We find night stands, tables and cabinets to wake up to
Italy vs England player ratings: Did Andros Townsend's goal see him beat Harry Kane and Wayne Rooney to top marks?

Italy vs England player ratings

Did Townsend's goal see him beat Kane and Rooney to top marks?
Danny Higginbotham: An underdog's tale of making the most of it

An underdog's tale of making the most of it

Danny Higginbotham on being let go by Manchester United, annoying Gordon Strachan, utilising his talents to the full at Stoke and plunging into the world of analysis
Audley Harrison's abusers forget the debt he's due, but Errol Christie will always remember what he owes the police

Steve Bunce: Inside Boxing

Audley Harrison's abusers forget the debt he's due, but Errol Christie will always remember what he owes the police
No postcode? No vote

Floating voters

How living on a houseboat meant I didn't officially 'exist'
Louis Theroux's affable Englishman routine begins to wear thin

By Reason of Insanity

Louis Theroux's affable Englishman routine begins to wear thin
Power dressing is back – but no shoulderpads!

Power dressing is back

But banish all thoughts of Eighties shoulderpads
Spanish stone-age cave paintings 'under threat' after being re-opened to the public

Spanish stone-age cave paintings in Altamira 'under threat'

Caves were re-opened to the public
'I was the bookies’ favourite to be first to leave the Cabinet'

Vince Cable interview

'I was the bookies’ favourite to be first to leave the Cabinet'
Election 2015: How many of the Government's coalition agreement promises have been kept?

Promises, promises

But how many coalition agreement pledges have been kept?
The Gaza fisherman who built his own reef - and was shot dead there by an Israeli gunboat

The death of a Gaza fisherman

He built his own reef, and was fatally shot there by an Israeli gunboat