These proposals are part of the UK's obligations to comply with the European Employment Directive of 2000.
Under current practice, companies are able to dictate the retirement ages of their staff without the need to justify the age that they set. This means that although an employee is fit and able to continue working he is forced to leave because he has reached the age (be it 60 or younger) that his employer has set. At present only 30% of people are in employment by the age of 65.
In their statement to Parliament, Patricia Hewitt, Secretary of State for Trade and Industry and Alan Johnson, the Secretary of State for Work and Pensions, advised that:
"This country cannot afford to squander the skills and experience workers of any age have to offer, and demographic changes mean that employers who cut themselves off from a proportion of the skills pool on the basis of prejudice will lose out."
The new legislation will impose duties on employers to justify the setting of any retirement age on their employees and this will be open to challenge.
The Government has been working towards these proposals since 1997, when it launched its Age Positive campaign. More recently, it issued a consultation document entitled Age Matters which focused on the age discrimination strand of the European Directive.
The effect of the proposed legislation on pensions was also discussed by the Ministers during their statement:
"With the abolition of the earnings rule in October 1989, the link between retirement and entitlement to the state pension was removed, and so people can continue to work beyond state pension age and still receive their state pension. Individuals can also choose to continue working and defer their state pension, and the recent Pensions Act contains more generous options for deferral, to be introduced by 2005, including for the first time, the option of taking a lump sum. In April 2006, tax rules preventing people from drawing their occupational pension whilst continuing to work for the same employer will be abolished."
Emma Grossmith, an employment law specialist with Pinsent Masons, the law firm behind OUT-LAW.COM, said:
"The Government has indicated that the new age discrimination legislation will follow a model of the legislation which already exists in relation to requests for flexible working. Currently, whilst employers are under a duty to consider such requests properly, there are numerous and wide grounds on which they can legitimately refuse them. Assuming the new legislation against age discrimination is drafted similarly widely, employers might have less to worry about than the government would like them to think."
Consultation on the draft regulations will take place during summer 2005, dependant on the outcome of the consultation it is hoped that the legislation will be in force as of 1st October 2006.