MANAGING WITHOUT THE DEFAULT
RETIREMENT AGE
A PANEL DISCUSSION
James Davies, Sarah McIntyre, Hannah Price &
Georgina Jones
15 June 2011
The Current Retirement Landscape (1)
•
The Employment Equality (Repeal of Retirement Age
Provisions) Regulations 2011 came into force on 6 April
2011
•
These Regulations
 Remove the exceptions in the Equality Act 2010 which
provide that it is not age discrimination to dismiss someone
aged 65 and over if the reason is retirement
Remove “retirement” as a fair reason for dismissal in the
Employment Rights Act 1996
The Current Retirement Landscape (2)
•
The retirement procedure (and the duty to consider requests
to stay on) have been deleted from the legislation.
•
It is therefore age discrimination to dismiss someone at age
65 or over, unless this can be objectively justified
What are the options for employers?
Remove retirement
age
Maintain retirement
age at 65 or higher
Dismissal of those
aged over 65 for one
of 5 fair reasons
Will have to justify
compulsory retirement
age
Demographics
90
60
85
50
80
40
75
30
70
20
65
10
60
0
Life expectancy MALE
Life expectancy FEMALE
6 per. Mov. Avg. (minutes life expectancy increased per hour MALE)
6 per. Mov. Avg. (minutes life expectancy increased per hour FEMALE)
Number of minutes life pxpectancy increases per hour
Life expectancy (years)
Rising life expectancy in the UK, 1981-2058 (Source: ONS)
Retirement age and hypothetical retirement age (Source: ONS)
72
71
70
69
68
67
66
65
64
63
62
Retirement age
Hypothetical retirement age (if it increased at same rate as life expectancy)
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
1989
1988
1987
1986
1985
1984
1983
1982
1981
1980
61
UK population projections by age 2008-2033 (Source: ONS)
25
Population (millions)
20
15
10
5
0
2008
2013
2018
60-74
2023
75-84
85 & over
2028
2033
0%
Mar-May 1992
Jun-Aug 1992
Sep-Nov 1992
Dec-Feb 1993
Mar-May 1993
Jun-Aug 1993
Sep-Nov 1993
Dec-Feb 1994
Mar-May 1994
Jun-Aug 1994
Sep-Nov 1994
Dec-Feb 1995
Mar-May 1995
Jun-Aug 1995
Sep-Nov 1995
Dec-Feb 1996
Mar-May 1996
Jun-Aug 1996
Sep-Nov 1996
Dec-Feb 1997
Mar-May 1997
Jun-Aug 1997
Sep-Nov 1997
Dec-Feb 1998
Mar-May 1998
Jun-Aug 1998
Sep-Nov 1998
Dec-Feb 1999
Mar-May 1999
Jun-Aug 1999
Sep-Nov 1999
Dec-Feb 2000
Mar-May 2000
Jun-Aug 2000
Sep-Nov 2000
Dec-Feb 2001
Mar-May 2001
Jun-Aug 2001
Sep-Nov 2001
Dec-Feb 2002
Mar-May 2002
Jun-Aug 2002
Sep-Nov 2002
Dec-Feb 2003
Mar-May 2003
Jun-Aug 2003
Sep-Nov 2003
Dec-Feb 2004
Mar-May 2004
Jun-Aug 2004
Sep-Nov 2004
Dec-Feb 2005
Mar-May 2005
Jun-Aug 2005
Sep-Nov 2005
Dec-Feb 2006
Mar-May 2006
Jun-Aug 2006
Sep-Nov 2006
Dec-Feb 2007
Mar-May 2007
Jun-Aug 2007
Sep-Nov 2007
Dec-Feb 2008
Mar-May 2008
Jun-Aug 2008
Sep-Nov 2008
Dec-Feb 2009
Mar-May 2009
Jun-Aug 2009
Sep-Nov 2009
Dec-Feb 2010
Mar-May 2010
Jun-Aug 2010
Sep-Nov 2010
Dec-Feb 2011
Changing demographics in the workplace 1992-2011 (Source: ONS)
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
16 - 17
18-24
25-34
35 - 49
50 - 64
65+
Default Retirement Age
Lewis Silkin – June 2011
Sarah McIntyre
Employee Relations Manager
Marks and Spencer - Overview

9.3 billion annual turnover

640 million annual profit

76,000 employees in 41 territories worldwide

21 million customers visit our UK stores each week

Founding member of the Employers Forum for Age

Sit on the Employer’s Forum for Age Steering Group

Have won awards and commendations for our age diversity

Younger worker focus as well – 1st high street retailer to remove the
U18 pay rate

Oldest employee 83 years old

Longest service 49 years
Abolishing the DRA

Motivation:
– Feedback from stores that they were losing good people
– Feedback from individuals that they didn’t want to leave M&S
– Embrace a workforce that reflects our customer base
– Organisational fit
– Drove positive external image

Considerations and Challenges:
– Strong policies and processes
– Preparation key
– Legal considerations
– Training for line managers
– Future risk?
12
Flexible Retirement

Introduced following A-Day – Changes to Pension reform (06/04/06)

Organisational fit

Popular with employees

Business benefits

Since 2006 number of employees aged 65+ more than doubled from 804
– 1656

2009/10 - 85% of employees who ‘retired’ did so flexibly
Older employees at M&S...

Employee Loyalty:
– 11% 20 years plus
– 5% 25 years plus

Your Say Survey Results 2011:
– Over 65’s 82% happy with the training they receive VS Company average of
76%
– Employees with 25 years service 100% satisfied
– Over 55’s 85% positive they’d still be working for M&S in 12 months time VS
Company average of 77%
– Over 65’s 96% positive they’d recommend our products VS Company average
of 93%
– Over 65’s 76% positive they’d recommend M&S as a place to work VS
Company average of 70%
Workplace Discussions (1)
Workplace Discussions (2)
“Whatever the age of an employee, discussing their
future aims and aspirations can help you identify
their training and development needs and provide
an opportunity for you to discuss your future work
requirements and how these impact on the
employee ... They are a good way of raising the
issue of retirement with older employees.”
ACAS – Working without the default retirement age
Workplace Discussions (3)
ACAS – suggested structure:
•
Performance to date against targets, activites and outcomes
•
Development or training needs
•
Future plans (employer)
•
Aims and aspirations (employee)
•
Future performance
Workplace Discussions (4)
•
Cannot hold employees to what is said as part of the
discussion
•
Flexible working opportunities in the lead up to retirement?
•
Legal consequences
Discrimination claims
Inferences
Lewis Silkin
Managing without the default retirement age
15 June 2011
Georgina Jones
© Sacker & Partners LLP 2011
www.sackers.com
Managing without the DRA
Retirement
processes
Pensions
Issues
Flexible
retirement
© Sacker & Partners LLP 2011
Normal
retirement
age (NRA)
What benefits
to offer post
NRA?
DRA – Normal retirement age (NRA)
Looks like
this can
be
retained
NRA?
But need to
offer benefits if
people carry
on working
© Sacker & Partners LLP 2011
Should NRA be changed?
Cannot
change for
past service
without
consent
Will not
change
automatically
NRA
Different for
different types
of workers?
© Sacker & Partners LLP 2011
Increases will
require
consultation
(60 days)
Benefits after NRA (1)
Continue DB for DB members
Beware of age
discrimination!
Starting point,
future benefits
same as past
© Sacker & Partners LLP 2011
Continue DC for DC members
Other options? If potentially
discriminatory, can you
objectively justify?
Benefits after NRA (2)
Member choice?
Members could
opt out and
defer benefits
© Sacker & Partners LLP 2011
Member choice?
Members who
opt out could
re-join the
scheme on terms
offered to current
new members
Flexible Retirement – from what age?
Potential age
discrimination issues.
Should be offered
to all at minimum
pension age (55)
unless can objectively
justify a different age
© Sacker & Partners LLP 2011
Objective justification?
e.g. if way of
retaining experience,
or managing
transition in parts
of the workforce?
Flexible retirement – what would you offer?
Take pension (all or part?)
and continue working
Benefits
Option to re-join for future?
(could just be DC)
Risk benefits? (Treat as active
or pensioner member? Make
choices clear)
© Sacker & Partners LLP 2011
Group insurance benefits
Very specific
Exemption
Covers benefits provided by
employers to employees
Only applies to insured benefits
(not self insured)
© Sacker & Partners LLP 2011
Pension schemes left out in the cold?
© Sacker & Partners LLP 2011
Pensions – new focus for workforce
management?
© Sacker & Partners LLP 2011
Performance management
Working past 65
Stephen Hawking - 69
The Queen - 85
Lord Philips - 73
Alex Ferguson - 69
Warren Buffett - 80
Prince Philip - 90
Sumner Redstone - 88
Kenneth Clarke - 70
Tom Jones - 71
Helen Mirren - 65
How will employees respond?
Retire anyway?
Work a bit later and then retire?
Work until feel should stop?
Work until chat with employer?
Aim for pay off?
Work beyond and wait to be sacked?
Implications for employers
Be able to plan
Avoid pay offs
Be able to deal with underperformance
Help employees who want to retire
Adjustments for disability
What employers should do
Obtain information
Consistent, honest and prompt performance
management
Consistent approaches to training and development
Adequate pensions
Flexible working programmes
Manager training
Avoid inferences
Insured Benefits
NEW EXCEPTION
It is not age discrimination to only provide access to
“insurance or a related financial service” to employees,
aged under 65 (or state pension age if greater).
Insured Benefits
•
Does not cover self-insured benefits
•
What about those over 65 who already get these benefits?
•
Will it deter employees from providing benefits to over 65s?
•
If you do provide benefits to the over 65s, will you be able to
justify stopping the benefits later on?
Enhanced redundancy schemes
•
Will reducing redundancy payments close to retirement still
be lawful?
 cases on windfall payments
> Kraft Foods v Hastie
> Ormerod v Cummins Engine Company Limited
> Loxley v BAE Systems Land Systems (Munitions &
Ordnance Ltd.)
Share schemes
•
Approved & qualifying schemes – minimal impact
•
Unapproved & EMI schemes
•
Consider “good leaver” provisions
•
Defining “retirement”:
Age?
Length of service?
Future plans?
Thank you