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The End of the Default Retirement Age?

Click here to buy - A How To Book of SMSF's by Tony Negline
Lester Wills

Readers of my work will know that I am no great fan of the age 65 as the target date for retirement. If it is appropriate, no problem, but I do not agree with those who have blind faith in that age as the start of the next stage in their lives. In some countries, that age takes on a greater role in that it is the compulsory age at which people must retire. However, it seems common sense is at last starting to see the light of day.

I recently discovered that a review of the default retirement age in the UK, namely the age at which employers can compel staff to retire (no prizes for guessing 65), is to be brought forward by a year according to recently released information from the UK government. In the opinion of BBC home editor Mark Easton, this move effectively signals the end to the default retirement age.

As Easton notes, the majority of people in the UK retire before 65, but 1.3 million people work beyond state pension age. The sad thing is that many more say they would continue working if their employer permitted it. However, not all agree with the move as the major employers group the Confederation of British Industry (CBI) suggested the move was "disappointing". Sadly I have yet to discover the reasons for this opinion given the fast approaching nexus of ageing work force and limited availability of workers

The government review had been expected in 2011 but will now take place a year early in 2010 instead. In what is a surprising move, UK Government Ministers stated they had brought the review forward to respond to changing demographic and economic circumstances. I am surprised that a government department is actually responding to changing social circumstances, but there again I am a cynic.

However, there is always an ulterior motive and the UK Prime Minister Gordon Brown is desperately in need of a boost in the polls and perhaps he has finally realized this segment of the population is an increasing large proportion of the electorate. He explained the change in the timing of the review by arguing that there is evidence to suggest that allowing older people to continue working, unfettered by negative views about ageing, could be a big factor in the success of Britain's businesses and our future economic growth. Well that is certainly a revelation! Whilst not being a fan of the incumbent, I will give him credit for finally recognizing what many of us have been saying for a while. I wonder if Mr. Rudd is listening to his 'mate' in Downing Street.

Not surprisingly the Trades Union Congress (TUC) welcomed the move. "It cannot be right that an employer can sack someone simply for being too old," said TUC general secretary Brendan Barber. Gosh shock horror, two revelations in the same piece!

The TUC spokesperson then made an interesting comment, "Employees should have choice - neither forced by employers to give up work, nor forced by inadequate pensions into working longer than they should." The CBI however argue that the step is not helpful. They suggest that "Having a default retirement age helps staff begin the process of deciding when it is right to retire, and helps firms plan ahead with more confidence." Whether using this frame of reference was actually optimal is a question that the CBI happily avoided. Even so, it argues that its own research indicated that more than 80% of those who asked their employer to keep working had been allowed to do so. I am sure that if you ask the right question of the right people you can very easily come up with that result. I am equally sure that the TUC could ask the opposite question in such a way to come up with a very different response. It would be interesting to know what evidence there is in Australia on this issue.

If this wasn't enough, there is now a legal imperative. The Court of Appeal in the UK is hearing a legal challenge to the default retirement age in a case backed by the Equality and Human Rights Commission. As the BBC notes, a solicitor, considers he was discriminated against on the grounds of age when he was not permitted to work beyond the age of 65. His argument is that he needed to go on working to support his family. The QC, acting for the Department for Business, Innovation and Skills, says the hearing will raise "important questions of policy and principle", a typically legally worded understatement to put it mildly.

Not only that, it seems there are a number of age discrimination cases are waiting in the pipeline for the outcome of this and another challenge being brought against the government by the charities Age Concern and Help the Aged.

I would suggest that using age 65 as the default retirement age has passed its use by date, something I have argued for many years. As is often the case, what happens in Europe is likely to have an impact in Australia. The question is when?

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