Industry | 2009.06.27
Lift jobs axe for over-65s, demand MPs
All-party committee says employers should no longer be able to sack older workers who want to stay
The legal right of companies to retire staff compulsorily on their 65th birthday must be abolished immediately to help address the deepening pensions crisis, a parliamentary investigation has concluded.
A report into pensioner poverty by an all-party group of MPs will recommend that older people should be able to continue working full or part-time into their 70s, 80s or 90s - with full holiday and other entitlements - so long as they are fit and able to do so.
The recommendations from the Commons work and pensions select committee, to be published next month, are a response to fears that many of the next generation of pensioners could end their years in poverty after being forced out of work at 65 with pension pots that have plummeted in value.
For those approaching retirement, the financial crisis and recession have left them with potential pension incomes of some 20% less than would have been the case a year ago and with no right to carry on working to make up the difference.
The committee\'s conclusions will, however, be fiercely resisted by business leaders who are determined to retain the right to shed staff at 65 and replace them, where necessary, with younger, cheaper workers. Last night the committee\'s chairman, Labour MP Terry Rooney, said the government had to recognise that the law not only discriminated against older workers, but also risked making the pension crisis worse.
"There are an awful lot of people now reaching pension age who are finding that their pension pots are nothing like as big as they expected them to be," he said. "They get to a situation where the employer is able to sack them at 65 and no one else will take them on."
The need for urgent action on pensions was highlighted last week by a series of alarming reports about the state of the industry. A survey of 1,000 blue-chip companies by PricewaterhouseCoopers found 96% believed their final salary schemes were unsustainable.
At the same time, the Organisation for Economic Co-operation and Development put Britain at the bottom of a league table of what those coming up to retirement can expect in terms of income.
The Department for Work and Pensions said last night it would not review the compulsory retirement age until 2011, a date that campaigners say will be too late for the 25,000 people forced to retire against their will each year. Already ministers have announced that the retirement age will be increased in phases to 68 by 2048.
At the moment, a British employer can dismiss a member of staff without redundancy payments on his or her 65th birthday. Employees have a right to request to work beyond 65, but employers have only to "consider" the request.
In 2006, Age Concern applied to the high court arguing that the rules were illegal. Its case was referred to the European Court of Justice, which ruled in March that compulsory retirement at 65 was not in breach of EU law so long as the UK government was able to justify it. It will be up to the high court to determine, finally, later this year whether the rules are "legitimate".
John Cridland, the CBI deputy director-general, said there was no need for change. "Some people can continue in their existing job beyond 65, but this is not possible for all occupations."
Independent pension expert Dr Ros Altmann said the financial crisis meant people now approaching retirement were doing so with their assets down in value, the cost of annuities rising and government policies working against them. "If you want to supplement a disappointing pension income with some part-time work, current policies penalise you from doing so, both through age discrimination legislation and the pension credit system," she said. "Why should it be acceptable to get rid of someone at 65? It is pure discrimination."
John Ralfe, a pensions consultant, said abolishing the compulsory retirement age was a "step in the right direction", but warned it could create a rush of legal challenges. "It is OK being a 67-year-old pensions consultant or a 67-year journalist but in some jobs requiring physical endurance maybe it is rather different. I can see lots of disputes and legal challenges."
Michelle Mitchell, charity director of Age Concern and Help the Aged, said about 70% of companies had compulsory retirement at 65. "The government should scrap a piece of legislation that is at odds with the needs of an ageing society and the economy," she said.
For more information, please visit
http://www.guardian.co.uk/money/2009/jun/28/lift-job-axe-over-65s
