17/01/11

Commenting on confirmation that the Government will abolish the Default Retirement Age (DRA), Georgina Jones, Associate, Sackers & Partners, outlines the likely impact for workers and company pension schemes:

Schemes ‘risk’ age discrimination claims

“Although the Government is still of the opinion that the removal of the default retirement age (DRA) will not affect occupational pension schemes as it will not affect the setting of a "normal retirement age" for their purposes, we must beg to differ. Occupational pension schemes are premised on people retiring at a certain age, classically 65 . If this is no longer to be the case they will need to adjust. If they do not do so, they risk age discrimination claims.

“If they have not already done so, schemes will need to consider what benefits to provide to those who continue working beyond the scheme's normal retirement age and should address the issue of flexible retirement as this is likely to become more popular.”

Death-in-service reprieve for schemes

“Employers and schemes will benefit, however, from the Government's decision to provide an exemption to the age discrimination legislation in respect of group risk insurance benefits, including income protection, death-in-service benefits and health insurance. Employers will be permitted to withdraw such benefits from employees aged 65 and above (the age will rise in line with State Pension Age).

Background

On Thursday the Government published its response to last year's consultation on its proposals for phasing out the default retirement age. It intends to proceed with its plan to phase out the DRA between 6 April and 1 October 2011. The Response states that "We [also] consider that the removal of the DRA does not affect occupational pension schemes. The absence of a DRA does not affect the setting of a "normal retirement age" or "normal pension age" for the purposes of occupational pension schemes".