In financial services we have been assailed in the past few years with longevity and employment statistics and research.
I am sure this will continue.
What we do know is that the days of automatic retirement at 60 or 65 have gone.
On a number of occasions pensions minister Steve Webb has announced the need for a cultural shift as older workers become accustomed to remaining in the workforce for longer. In order to accommodate this, it is likely the future world of employment will look to benefit from retaining the skills of older workers.
Mr Webb said: “We need to get used to the idea of longer working lives but we cannot just jack up the pension age and ignore the labour market.”
Recent figures from the Office of National Statistics suggest the number of people aged 65-plus who are still in employment has, for the first time, reached 1m.
Coinciding with the release of the report the DWP commented: “Enabling older people who can work, to stay in work is critical to the economy and pensions sustainability – and to the financial, health and social wellbeing of individuals.”
Alongside this, a recent report from the Institute of Economic Affairs (Work Longer, Live Healthier: The Relationship Between Economic Activity, Health and Government Policy) looked at the relationship between retirement and health. It found that working longer could be good for health, while retirement could bring on a variety of medical conditions.
So, working longer could be good for your health and good for your finances if you have not yet got sufficient resources to fund that long retirement. But what does this mean from a societal point of view?
It means creating new jobs, but also encouraging employers to make it easier for existing employees to continue working.
The introduction of legislation to make age discrimination illegal culminated recently in the removal of the default retirement age. This means employers can no longer force an individual to retire, as doing so could be age discrimination.
The legislation took effect in April 2011 and, in theory, means employers can no longer use a default retirement age to enforce a compulsory retirement strategy for their workforce.
The aims of the policy seem logical. In the words of the government, it will “reinvigorate retirement” and encourage people to work longer, particularly with increasing longevity. In practice, the idea is perhaps less easy to implement.
A number of cases in Europe and the UK show it is still possible for employers to argue that a default retirement age is objectively justified and is a proportionate means of achieving a legitimate aim.
Law
This takes us into the realms of employment law and the definition of objective justification.
If employers cannot force staff to retire due to age, then they may seek other ways of terminating employment – for example, through questioning an employee’s conduct or capability, or making them redundant.
In brief, some of the legal principles were:
■ The Heyday case, which ruled that a default retirement age of 65 could be justified if there was a legitimate social aim.
■ The European Court of Justice case of Fuchs and another v Land Hessen, which held that the concept of using a balanced age structure to provide access to employment by younger people, to the promotion of younger people and to prevent disputes concerning fitness to work beyond a certain age, was legitimate and proportionate.
■ The ECJ case of Prigge and others v Deutsche Lufthansa, which considered whether a provision in a German collective agreement precluding airline pilots from working beyond the age of 60 was age discriminatory. It held that a compulsory retirement age of 60 for Lufthansa airline pilots (contained in a collective agreement recognised by German law) was age discrimination, as international law fixes the age limit for airline pilots at 65 – therefore the compulsory retirement age of 60 was not “necessary” to achieve the proposed result.
These cases are all well and good, but they are focussed on large employers. How about small employers?
Seldon
Here I think we have to turn to the Seldon case, which concluded in an employment tribunal at the end of May 2013.
In a nutshell, Mr Seldon was a partner in a law firm. The partnership agreement contained a clause that meant a partner had to retire at age 65 – Mr Seldon argued this was age discrimination but the partnership said it needed to ensure workforce planning (that is, the partnership employs juniors who ultimately want to become partners and therefore partners have to retire for ‘new blood’ to come through).
The case originally commenced in 2006/2007 and, having gone through the employment tribunal up to the supreme court, was finalised just a few weeks ago.
The supreme court had concluded that legitimate workforce planning was acceptable and referred back to the tribunal to find out if the case in question was proportionate. It decided that, by imposing a retirement age for partners of 65, the firm struck an acceptable balance between the needs of the firm and the individual partner.
For me, the judgement and its conclusion left open a few issues:
■ Can it be applied to a number of employers or will each employer have to justify his or her workforce plan?
■ The retirement age in question for the Seldon judgement was 65. But this case commenced in 2006. Since then there has been a move away from retirement at 65 and an increase in state pension age. Would age 65 be proportionate in today’s terms when retirement at 65 is no longer the norm?
■ Does this decision apply just to partners or other employees?
As usual when pensions become so intrinsically linked with employment
There is a fine line between employer control over planning and the individual exercising his right to continue working.We must also be wary of creating a big division, and therefore uncertainty, over whether a particular type of employer or even industry will or will not be allowed to work on.
The concept of working beyond age 65 is great, but in practice a workforce ‘hanging on’ to an earning opportunity might not be good for an efficient economy when there are a whole raft of young people knocking at the door.
Mike Morrison is head of platform marketing at AJ Bell