Retirement law change welcomed

Under the measures, being phased in between April and October, bosses will no longer be able to set a mandatory age for retirement except in a few occupations, such as police officers and air traffic controllers.

But there was anger at provisions in the Pensions Bill, also published today, which will bring forward to 2020 the planned rise in the state pension age to 66, as well as the proposed switch to a less generous index for the uprating of pensions.

Labour's pensions spokeswoman Rachel Reeves said: "It is clear that on top of the VAT hike, these changes mean pensioners will be worse off next year under this Tory-led Government. Pensioners will be asking why they are having their pensions eroded when they have no responsibility for causing the financial crisis."

Employment Relations Minister Ed Davey said the abolition of the default retirement age was "great news for older people, great news for business and great news for the economy".

"Retirement should be a matter of choice rather than compulsion– people deserve the freedom to work for as long as they want and are able to do so," he said.

"Older workers can play an incredibly important role in the workplace and it is high time we ended this outdated form of age discrimination."

He dismissed fears that young people will face a tougher struggle to find work if over-65s are allowed to stay on in their jobs. Allowing people to work longer will boost the economy and increase the overall size of the workforce, creating more opportunities for the young, he insisted.

Fewer than one-third of firms still insist on staff leaving on their 65th birthday, and there are around 850,000 older people working in the UK, said Mr Davey.

But the Institute of Directors has warned that doing away with the retirement age – a commitment of the Government's coalition agreement – will reduce flexibility for employers.

And John Walker, chairman of the Federation of Small Businesses said the default retirement age should be kept.

"It is extremely useful for those small businesses that need it and it can stimulate discussions on future career plans and retirement," said Mr Walker.

"This will also add to the fears of more employment tribunals if an employer does need to dismiss an underperforming member of staff."

Employment expert Paul Mander, of law firm Dawsons, warned: "Employers will now have to justify objectively any form of retirement age and may find it extremely difficult or prohibitively expensive to continue to provide certain benefits such as health or life insurance for employees beyond the age of 65.

"Any employees near the end of their careers may need to be subject to detailed performance reviews rather than the employer having a gentler option available."

But Mr Davey said guidelines published yesterday make clear employers will still be able to conduct performance appraisals and fairly dismiss staff found to be no longer capable of effective work.

Age UK welcomed the phasing out of forced retirement. Charity director Michelle Mitchell said: "With people living longer and healthier lives retirement patterns are changing rapidly and employment regulations need to be brought in line with workers' legitimate aspirations."

Ros Altmann, director general of Saga, said: "As the first baby-boomer has reached 65 this year and as millions more will reach that age in the next few years, the labour market has to adjust to reality."