A Supreme Court ruling permitting firms to retire workers at a fixed age has been welcomed by experts as an important clarification of mandatory retirement laws.
Judges last week rejected an appeal from a former City law firm partner dismissed on age grounds, ruling the firm had acted within its rights, saying “inter-generational fairness” was a legitimate business aim.
Law firms said the ruling gave employers more grounds to dismiss employees due to their age but warned it would have little practical impact on firms and their pension schemes.
The court failed to indicate the appropriate age for mandatory retirement, which was 65 until the government’s abolition of the default retirement age, leaving the issue open to question.
Pinsent Masons partner Christopher Mordue said the ruling was the “first really authoritative decision” on when it is lawful to use mandatory retirement ages but added it would change little for firms.
He said: “It would be wrong to see the rejection of this appeal as making it easier for employers to use compulsory retirement.
“Most employers will probably stick with their approach of abandoning compulsory retirement ages at least until operating without these creates real issues that might form the basis for a well-considered objective justification defence.”
Ashurst head of employment, incentives and pensions Caroline Carter added: “The safest course is to remain without a compulsory retirement age and therefore avoid the inevitable legal argument that would follow if they tried to introduce one.”
The DRA was removed by the government in October last year to prevent workers from having to retire at 65.
Maclay Murray & Spens partner Amanda Jones said: “This judgment might lessen the impact on employers of the government’s earlier decision to abandon DRA, who will welcome it and see this as offering some of the flexibility required to remain competitive.”
However, Confederation of British Industry director for employment and skills policy Neil Carberry criticised the government for leaving a “vacuum” for employers after scrapping the DRA.
“If employers want to set a retirement age that is suitable for their workforce, and know for sure whether it is legitimate, they will still have to go through a costly and lengthy legal process,” he said.
“The government cannot continue to pass the buck. Employers need to know how to handle the sensitive issue of retirement, with adequate protection to discuss plans with their staff, and better guidance on when a retirement age is justifiable.”
The ruling revolved around the dismissal of a partner at law firm Clarkson Wright & Jakes in 2006.
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Partner Insight: Members' evolving needs and expectations are driving changes in scheme administration. As the pensions landscape inevitably continues to change, how will your scheme's approach need to develop to keep pace?