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The Regulations that will repeal the Default Retirement Age have now been finalised

The draft regulations phasing out the default retirement age (DRA) have been finalised and were put before Parliament on 1 March 2011. This article summarises the effect of the Regulations.

Summary

In the long term the new Regulations remove the exceptions that currently say it is not age discrimination to retire someone and that retirement is a potentially fair reason for dismissal.  However, there are some transitional provisions. 

The Regulations also provide a new exception allowing an employer to limit access to insurance or related financial services to employees under 65.

In more detail

The Regulations (coming into force on 6 April 2011) will delete paragraphs 8 and 9 of Schedule 9 to the Equality Act 2010 which currently say:

  • it is not age discrimination to dismiss someone at or over age 65 if the reason is retirement; and
  • it is not age discrimination to refuse to offer someone employment who will reach retirement age within 6 months time

The Regulations will also delete S.98(2)(ba) of the Employment Rights Act 1996 which says that retirement is a fair reason for dismissal and the associated provisions about when retirement is taken to be the reason (S.98ZA – 98ZH).

Finally, the Regulations will delete Schedule 6 to the Employment Equality (Age) Regulations 2006 which sets out the employer’s duty to inform the employee of its intention to retire him/her and the duty to consider requests to stay on.

But watch out for the transitional provisions...

Transitional provisions

The regulations are subject to transitional arrangements that will allow retirements to take place on or after 6 April 2011 in certain circumstances.  In order for the transitional provisions to apply:

  • the employer must reach 65 (or the employer’s normal retirement age if later) by 30 September 2011; and
  • the employer must give notice of retirement to the employee under the DRA notification procedures on or before 5 April 2011.

Note that the employee’s right to request an extension will still apply.  The regulations provide that if an employee makes a request to stay on beyond retirement, an extension of up to six months can be added to the retirement date notified under the transitional provisions.  (An extension of any longer than this would mean that the retirement would fall outside the transitional provisions – making it unlawful unless justified.)

The upshot is that the long-stop date for retirements under the transitional provisions will be 5 October 2012 – i.e. six months after the twelve-month notice of retirement that must be given by 5 April 2011 at the latest.  This is a change from the Government’s initial position, which was that all retirements under the old procedure would end by October 2011.

Note:  The original version of the regulations published on 28 February contained a major drafting error excluding people who are already 65 before 6 April 2011 from the transitional arrangements. This was corrected in the second version of the regulations put before Parliament on 1 March and is reflected in the final Regulations below.

Insurance

The new Regulations replace the existing limited exception for an employer to provide life assurance for a period between an early ill health retirement and 65 (or normal retirement age) with a provision saying it is not age discrimination to provide access to ‘insurance or a related financial service’ only to employees aged under 65 (or state pension age, if greater).

While the state pension age is still 65, the exemption itself only applies to:

  • ceasing benefits at 65; or
  • restricting benefits to the under-65s.

It doesn’t expressly cover a situation where an employer already provides a benefit to age 70, for example.  In that situation, a 71 year old could potentially bring a claim comparing herself to a 69 year old – this wouldn’t be covered by the exemption so the employer would have to justify in the normal way.

This may be an issue for employers who have extended cover for employees they’ve allowed to stay on under the duty to consider procedure.

The exemption is restricted to the insurance/service being provided pursuant to an arrangement between the employer and a third party – the classic insured benefit situation.  (There’s a specific provision for employers who are in the insurance business, where they can provide their own product). 

So it won’t necessarily cover employers who self insure.  Some self-insurance schemes are funded by the employer, but administered by an insurer – this might bring it within the exemption, but it’s not clear.