Response by Saga to the Government consultation on the default retirement age

Monday 11 January 2010

Response by Saga to the Government consultation on the default retirement age

The Default Retirement Age (DRA) of 65 is a clear example of ageist discrimination by which the Government justifies the right of employers to retire (=sack) employees at the age of 65 on the simple basis of age rather than skill or ability. The Government does not apply the same criterion to Civil Servants who are exempted from the DRA. The Work and Pensions Select Committee report on the Equality Bill recommended that, “The Government removes regulation 30, which permits employers to continue to compulsorily retire employees at the age of 65. This regulation contradicts the Government’s wider social policy and labour market objectives”. We are frankly surprised that the Government has not chosen the vehicle of the Equality Bill, currently before Parliament in order to abolish his discriminatory law, especially since the European Court of Justice (ECJ) has warned HMG that a high level of proof would be necessary to justify why enforced retirement ages are necessary. The ECJ also warned that reasons related to consequent costs or competitiveness of employers should not enter into the equation – strange to note then that the Government’s consultation on the matter should specifically include “impacts on business”. For the sake of record, Saga operates a flexible retirement policy which operates very smoothly inside the company.

In a Department of Work and Pensions publication, “Building a Society for All Ages” (July 2009) Government makes an excellent case for abolishing the DRA:

Potential financial benefits of working longer

  • A single man earning £24,500 (take-home pay of £360 per week) who has worked all his life can expect a retirement income at 65 of £213 a week from State and occupational pensions. If he defers retirement until 67 and then takes his State and occupational pensions, he will retire on £243 a week. He will also take home higher pay during the last two years' work (£406 per week) as he will not have to pay National Insurance contributions
  • A single woman earning £40,000 (take-home pay of £566 per week) who has taken eight years off work to look after children can expect a retirement income at 60 of £223 a week. If she defers retirement until 65 and then takes her State and occupational pensions, she will retire on £330 a week, again with higher take-home pay (£639 per week) during the last five years worked

It is not just the individual who benefits from working longer. Older workers continue to contribute to the economy, and provide experience to business: employers say they most appreciate the loyalty and maturity of people aged over 65. Adding an additional year to working lives could increase UK Gross Domestic Product (GDP) by around 2 per cent. Some people want to retire early but others want to work for longer. We need to give them the flexibility to choose what is right for them. We will work together with the business and voluntary sectors to achieve this, as well as continuing to tackle the barriers to working longer such as inadequate training, negative employer attitudes and poor health.

Potential financial benefits of working longer

FACT 1: Together the drop in work rates among men over 50 and ageism in the workplace is estimated to have cost the economy between £16 billion and £31 billion per year due to lost GDP.

FACT 2: A 2002 survey found that 50 per cent of men and 40 per cent of women who retire before State Pension age say they were ‘forced’ out of work.

FACT 3: There is a 17.4 per cent gap between the employment rates of those aged 50 to 69 and the 16 to State Pension age population as a whole.

FACT 4: A 2004 survey found that half of workers aged 50 to 69 would consider working part-time or occasional jobs after they retire, but only 10 per cent would consider full-time work.

Employers can also benefit from older people as customers. People over 50 currently account for 80 per cent of national wealth and 40 per cent of annual consumer spending and business is starting to recognise the opportunities of providing products and services for people in this age group….

Increasing numbers of people are going to want to take advantage of their longer active lives and keep working. Whether they want to boost their income or keep enjoying the autonomy and sense of worth that comes with work, it will be important to allow those who want to, to keep working for longer. There is also the significant benefit to business of tapping in to the experience and commitment that older people can bring.”

We believe he Government should have the confidence of its own logic. Besides, they would have great public support. We undertook a survey of 14,178 people over 50 in December 2009. 85% of our sample thought that employees should have the right, where practicable, to have a staged retirement (see results appended).

The Saga Manifesto drawing on further extensive research had this to say on the DRA: “Recent Saga research shows that almost 97% of today’s over-50s reject the idea of working doggedly until state retirement age and greatly prefer to scale back working hours before this time. The average age at which they aspire to shift away from full time work is 57; however, the predominant desire is to diversify, not simply downsize. Seven out of 10 ideally want to participate in some voluntary work as well and almost two fifths (38%) ideally wish to continue doing some paid work past state retirement age. In addition, more than a third (34%) of people that have already retired say they would prefer to be doing some paid work. As the law stands, companies and the public sector can make employees retire at 65 even if they want to continue working and are competent and fit to do so. In a recession, this makes people coming up to the default retirement age (DRA) particularly vulnerable to redundancy.

The Turner Commission highlighted the fact that if a greater number of older people remain in employment that would ease the pensions crisis. The Government has said it wants to bring one million of them back into the workforce. This makes a nonsense of the DRA. Saga thinks every party manifesto should contain a pledge to abolish the default retirement age, which would be popular and would help people cope with the financial pressures of older age as well as making them less dependent on the State. The Government should also encourage more employers to adopt flexible employment policies which allow older people to achieve their own pace of retirement in a stepped manner. This would have significant benefits for the economy - longer retention of sources of wisdom; more scope for managed handovers of responsibility; less of a burden on social security; and a higher living standard among the elderly.”

Our conclusion is quite simple: the DRA should be abolished forthwith. If, however, this is not done then at the very least employers should not be able to force people into retirement before they qualify for a state pension.

We also believe that there is an opportunity to act on the desire of many people for retirement to be a process rather than abrupt event - so it is more akin to strolling down to the beach, rather than falling off a cliff. To this end employers and employees ought to be encouraged to agree a process by which full-time employees move to part-time employment as a prelude to their retirement.


Saga/Populus poll of 14,178 people carried out between 17th and 22nd December 2009.

For more information please contact the Saga Press Office on 01303 771529

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