The coalition government announced plans at the end of June to drop the default retirement age. On the face of it, the proposed change has advantages for us all: more control over when we want to retire, less chance to be forced out on age grounds and a better-adjusted work/life balance if employers also introduce flexible working policies.
Based on current attendees at pre-retirement courses, retirees range from those who can't wait to leave work to those who are worried about how to spend their free time. The danger, once the default retirement age disappears, is that those who can't immediately see the benefits of retiring or aren't natural planners will cling on to work or adopt an "it's easier to do nothing" approach, hence missing the opportunity that retirement presents.
But there also are unforeseen consequences, which will be determined largely by how organisations handle the proposed change. How employers will react will depend very much on the climate and incentives proposed by the government to help transition. The single biggest consideration is financial. What will such changes mean to an organisation if it no longer has the safety valve of being able to let a proportion of staff go with no redundancy costs? They may now have to focus on getting rid of the least effective staff – not just the oldest – and put more emphasis on ability measures and proper performance management.
In most organisations, little dialogue currently goes on about retirement – until it is too late. Younger managers are often ill-equipped to understand the issues of someone facing the end of his or her time at the company. They will now need to ensure that an open-ended conversation goes on throughout an individual's career, not only so that it becomes an accepted topic for discussion, but also to make sure that "retirement talk" is not seen as an indication that the employer wants to get rid of them. Managing older workers will also need to become a core skill, with more help given to staff to help decide when to retire.
Assuming the removal of default retirement age does result in an overall increase in people working longer, organisations may also face a succession problem – there will be less opportunity for younger managers, causing an outflow of talent. However, those potential problems might relate to how older and younger workers are viewed in the workplace. Is there subtle age discrimination and are stereotypical views of young and old held, or does the organisation have a sound factual basis for managing?
If we don't get it right, the potential drawbacks are substantial. If covert age discrimination and age stereotypes aren't overturned, we could see organisations finding ways to shed workers because of perceived cost, performance and health issues – subsequently facing great difficulties when deciding on their exit. This might also lead to far more "contract jobs for fixed terms", rather than continuous employment. We could also see actual and perceived inequalities increase with only the well-off, higher-income professionals able to retire early, while others have to soldier on.
Only if the right environment is created within organisations can those changes be beneficial. It is crucial that the potential issues outlined are widely debated.
Article from The Guardian