The New Age of Retirement Starts Here

It is a little-known anomaly of British employment law, and today the government finally kick-started its drive to eradicate it.

At present, though the country prides itself on its anti-discrimination legislation, firms nevertheless enjoy an explicit legal entitlement to dismiss staff members solely on the basis of their age.

That’s because 65 is not only the age at which individuals can begin to draw their state pension, but also the ‘default retirement age’ (DRA), at which workers face being forced to retire by those they have hitherto spent their days serving.

We all know the state pension age is to rise over the coming years, and now the government is scrapping the DRA altogether. Unsurprisingly, trade union leaders have welcomed the move.

Alarmingly, employers are up in arms.

The CBI has described as inadequate the government’s new guidance for firms on how to retire staff that are no longer up to the job, while the Institute of Directors has – puzzlingly – interpreted the changes as reducing flexibility for bosses. Others worry about the effect on young jobseekers, or the quality of older people’s retirement.

Such criticisms are not only exaggerated (or plain wrong) on a basic level, but fundamentally miss the point.

Take the flexibility argument. The abolition of the DRA does not prevent firms from using the provisions of other employment legislation to dismiss poorly-performing or incapable employees – of whatever age. On the other hand, it removes the temptation to exploit the law in order to arbitrarily reduce the age of a workforce.

Employees, however, clearly have the most to gain from the change. Older workers will no longer face the spectre of being driven out of work whilst still fit and healthy just because of their age – this legal provision being an astonishing contradiction of otherwise-strict equality laws.

Finally, there’s the discussion about the impact on the labour market. It’s intuitive to think that because more older people will be able to stay in work longer, jobs that would otherwise become available more regularly will suddenly prove hard to come by for an already squeezed and embattled younger generation of workers.

But it is not that simple, for this assumes a ‘zero-sum’ employment game in which the number of jobs stays constant, irrespective of labour-force and economic growth.

Indeed, it will be fascinating to discover whether the retention of experienced workers boosts the number of jobs created in the economy and/or the success of those in work in the early and middle part of their working lives.

Fundamentally, however, this legislative change is far less about employment than it is about retirement; it is no coincidence that the announcement was made on the same day as the publication of the Pensions Bill, which provides (among other things) for increases in the State Pension Age.

Retirement is changing.

Gone are the days when people worked until the day after which – their government dictated – they were no longer capable of working, and moved from full-time work to no work; no sooner and no later.

Gone are the days when a large majority of jobs required a high level of physical fitness that gave older employees no option but to call it a day anyway.

In the 21^st century, people do not feel handicapped by their age. In the 21^st century, people do not grind to a halt on their 65^th birthday.

The academic consensus on ageing has long advocated an evolution towards less black-and-white approaches to the end of the working life, including flexible retirement ages and more part-time working. Ultimately it’s about recognising not only that people live longer, but that they are healthier as they do so.

By giving them greater choice, governments empower workers, and that can only be good for the economy, for society and for democracy. Even if it does make inflexible employers feel threatened.