Mike Morrison looks at the possible implications of having a default retirement age...

In its first year, the coalition government has introduced a raft of legislative changes, many of which have been high-profile. But the one that has perhaps slipped under the radar has been the removal of the default retirement age.

Over the past few months, the news has been full of details of the proposed changes to the state pension age. At the same time, little has been said of the removal of the default retirement age.

This legislation was very much driven from Europe and derives from the age discrimination legislation. It states that from April 2011, employers are no longer able to use a default retirement age of 65 (or older) to enforce a ­compulsory retirement strategy on their ­workforce.

In real terms, this means that if you take into account the ­requirement to give people six months' notice of retirement, only people who were notified before 6 April and whose retirement date is before October can still be made to retire. After this time, the only real reasons for retirement will be conduct, capability, redundancy, illegality or some other substantial reason.

The aim behind the policy seems logical, in the words of the government, to "re-invigorate retirement" and encourage people to work longer, particularly with increasing longevity.

Steve Webb, the ­Pensions ­Minister, has spoken about a ­cultural shift in our expectations in retirement and this is very much part of that shift.

In practice, however, the idea is less easy to implement and it ­appears that 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.

But this is starting to take us into the realms of employment law and the definition of objective ­justification.

There have been a number of ­specific cases on this subject and the result so far is far from clear. Let us look at a few of these cases.

Case studies

The Heyday Case (Case 388/07, March 2009) ruled that a default ­retirement age of 65 could be ­justified if there was a legitimate social aim.

The Seldon v Clarkson Wright and Jakes case (July 2010), due to be heard on appeal in the Supreme Court in January 2012, confirmed the social aim would not apply to a private employer. Instead, private employers would just have to show legitimate ­workforce planning in their objective justification. As such, the ruling in this case could prove to be a landmark in the ­compulsory retirement debate. 

Recent cases in the ­European Court of Justice (ECJ) have ­developed this argument in Fuchs and Another v Land Hessen ­(C-159/10; C-160/10, July 2011).

The ECJ held that the concept of using a balanced age structure to ­either provide access to employment for younger people, or to prevent ­disputes concerning fitness to work beyond a certain age, was ­legitimate and proportionate.

In the case of Prigge and others v ­Deutsche Lufthansa AG C-447/09 (Sep 2011), the ECJ considered whether a provision in a German collective agreement precluding airline pilots from working beyond the age of 60 was age discrimination.

The ruling found in favour of the plaintiff, based on the fact that both German and international law fixes the age limit for airline pilots at 65 and therefore, the compulsory retirement age of 60 was not necessary to achieve the proposed result.

The ECJ also argued that the retirement age could not be objectively justified because, in its view, air safety does not constitute a legitimate aim for the purposes of justifying direct age discrimination.

Where next?

An important step is likely to be the result of the appeal in Seldon and hopefully this might give us some specific guidance for UK scenarios.

In the meantime, this does seem to suggest an area of the law that will develop with individual cases and circumstances.

A recent article in The Lawyer on this subject ("Opinion: Compulsory retirement cases remain each to their own") added to the debate the fact that one of the key principles of anti-discrimination law is the idea of "treating like cases alike and unlike cases differently".

You can see the conundrum that faces the tribunals and courts.

Mike Morrison is head of pensions development at AXA Wealth