UK Default Retirement Age: DRA of 65 to be Phased Out in 2011

Jan 25, 2011
Carol Finch

Employers Can't Make Workers Retire on a DRA From 2011 - Photo by btafly

The current Default Retirement Age in the UK of 65 is due to be phased out from 6th April 2011. What does this mean for workers and their retirement plans?

Until recently, a UK employer could enforce Default Retirement Age rules and make an employee retire at the age of 65, whether they wanted to give up work or not. The DRA will now be abolished gradually over 2011. How will the process work and what does this mean for workers planning for retirement?

Why is the Default Retirement Age Being Scrapped?

This is part of a range of changes to pension and retirement rules announced by the UK's government in recent months. Increased longevity means that workers often can, and sometimes want to, work on later in life. Preventing employers from enforcing retirement on those who need or prefer to remain in their jobs could also ease the strain on the benefits system in this difficult economic climate.

What Will Happen to the DRA?

The start of the process is set for the 6th April 2011 and will be completed by the 1st October 2011. Other dates of note include:

30th March 2011: This is the final day that an employer will be able to give a DRA six months notice of compulsory retirement
30th March-6th April 2011: During this period, a DRA can only be issued using short notice provisions. Employees could claim compensation under these rules of a maximum of eight weeks' wages
6th April-30th September: Employees can only be compulsorily retired if they were notified before the 6th of April and will retire before the 1st of October
30th September 2011: This is the last day that an employee can be compulsorily retired under the DRA

From this point most employers will not be able to make employees take compulsory retirement under the current rules.

Does This Mean the End of Compulsory Retirement in the UK?

It is likely that measures will be put in place to assist some employers when the system changes. It may, for example, not be appropriate for older workers to do certain jobs (i.e. those that require a certain standard of physical and/or mental fitness) and some professions may be able to continue to enforce a set retirement age.

The UK's Advisory, Conciliation and Arbitration Service (ACAS) uses the term 'objectively justified' to describe this scenario. In its advisory booklet for employers (Working Without the Default Retirement Age), the service outlines the possible need for an EJRA (Employer Justified Retirement Age) in some sectors. EJRAs are already used in some jobs (e.g. emergency services and air traffic control).

Will Phasing Out Compulsory Retirement Impact on Pension Savings?

Scrapping the DRA doesn't mean that people have to carry on working, but this could extend career opportunities and working life for some. But, not having a target date to aim for may make it harder to start to save or to plan savings and some may not be as disciplined as they should. It may be worth getting estimates of income from a retirement calculator to assess what needs to be done to provide for later years.

But, on the other hand, this could give some people the chance to boost their income in later life, especially if they are not on target with their pensions savings. Also, staying in a job for an extra few years could allow workers to defer taking the State Pension. This could increase the benefits they are paid when they do make a claim.

Those interested in learning more about other changes to retirement and pensions may find the following articles useful:

Sources: Directgov (Default Retirement Age to end this year); ACAS (Retirement Process and the removal of the Default Retirement Age). Accessed online 25th January 2011.