Draft Employment Equality (Repeal of Retirement Age Provisions)
Regulations 2011

The Committee consisted of the following Members:

Chair: Philip Davies 

† Aldous, Peter (Waveney) (Con) 

Burt, Lorely (Solihull) (LD) 

† Davey, Mr Edward (Parliamentary Under-Secretary of State for Business, Innovation and Skills)  

Davies, Geraint (Swansea West) (Lab/Co-op) 

† Ellis, Michael (Northampton North) (Con) 

Evans, Chris (Islwyn) (Lab/Co-op) 

† Flynn, Paul (Newport West) (Lab) 

† Greenwood, Lilian (Nottingham South) (Lab) 

Hepburn, Mr Stephen (Jarrow) (Lab) 

† Liddell-Grainger, Mr Ian (Bridgwater and West Somerset) (Con) 

† Lucas, Ian (Wrexham) (Lab) 

† McDonagh, Siobhain (Mitcham and Morden) (Lab) 

† Morgan, Nicky (Loughborough) (Con) 

† Newmark, Mr Brooks (Lord Commissioner of Her Majesty's Treasury)  

† Nuttall, Mr David (Bury North) (Con) 

Simpson, David (Upper Bann) (DUP) 

† Stewart, Bob (Beckenham) (Con) 

† Whittaker, Craig (Calder Valley) (Con) 

Glenn McKee, Committee Clerk

† attended the Committee

First Delegated Legislation Committee 

Monday 28 March 2011  

[Philip Davies in the Chair] 

Draft Employment Equality (Repeal of Retirement Age Provisions) Regulations 2011 

4.30 pm 

The Parliamentary Under-Secretary of State for Business, Innovation and Skills (Mr Edward Davey):  I beg to move, 

That the Committee has considered the draft Employment Equality (Repeal of Retirement Age Provisions) Regulations 2011. 

It is a great pleasure to serve under your chairmanship again, Mr Davies. 

The regulations will deliver the Government’s pledge to phase out quickly the default retirement age from 6 April. They will repeal the legislation that currently allows an employer to dismiss an employee for the sole reason that he or she has reached the age of 65. The administrative procedures with which employers using the default retirement age must comply will also be repealed. To give employers currently using the default retirement age—or the DRA—time to adjust, the repeals are subject to transitional arrangements that will allow retirements to proceed where individuals have been notified of retirement before 6 April and are 65 or above before 1 October. 

The regulations will also introduce an exception to age discrimination legislation for group insurance benefits provided by employers for their employees—for example, income protection, health cover and life assurance. The consultation on the removal of the DRA identified a real risk that, with an age limit no longer in place, those benefits might be reduced or removed for not only older workers, but everyone. The exception will make it lawful to withdraw such benefits from employees at 65 or over, and that minimum age for the withdrawal of assured benefits will increase in line with increases to the state pension age. 

People today are living longer and enjoying healthier and more active lifestyles. For many individuals, that means wanting to extend their working life. Motivations for remaining in employment past retirement age are varied. A survey by the Department for Work and Pensions in 2008 found that money, cited by 63% of people, was the major cause, while 57% said that they enjoyed their jobs and 38% said that working helped to keep their minds active. 

Repealing the legislation is good for the UK economy. Older workers offer a wealth of talent and experience as employees and entrepreneurs. They make a vital contribution to securing our country’s recovery, future growth and prosperity. The over-50s currently make up just under a quarter of the work force, rising to nearly a third by 2020. The latest figures from the Office for National Statistics show that the number of people over the age of 65 working in the UK more than doubled in recent years—from 412,000 in 2001 to 870,000 by the end of 2010. 

Nevertheless, we all have to stop working at some point, and we all need to think about how to manage the transition from working life to retirement. Everyone wants to enjoy a comfortable retirement, so it makes sense to plan for the future. That might involve saving more, working longer or reducing work commitments gradually over several years. The Government are committed to reinvigorating retirement and are taking significant steps to enable people to plan with confidence. We have re-established the link between earnings and the basic state pension and, as confirmed in last week’s Budget, have introduced a triple lock, so that basic state pensions rise by the rise in earnings, prices or 2.5%, whichever is the highest. In addition, we are working to create a new framework for private pensions, including the introduction of automatic enrolment. 

The ability to choose when to stop working must also be at the heart of any new system of fair and sustainable pensions. As I have said, older workers make an important contribution to securing the economic recovery and to the UK’s future economic growth. With increasing life expectancy, demographic change and skill shortages, it is more important than ever that employers make full use of all available talents, regardless of age, and that older people are encouraged to carry on working. 

Put simply, the country cannot afford to ignore the contribution and potential of older workers. Someone’s age should not be the sole criterion on which their ability to do their job well is judged. Research shows that productivity does not decrease with age in the vast majority of jobs. It also shows that older and younger workers often bring complementary skills and qualities to the table. 

Extending working life would also play an important part in reducing pensioner poverty and ensuring that individuals are able to fulfil their expectations of retirement. For example, the single man with a good employment history who decides to work one year beyond state pension age can increase his retirement income by up to 10%. As I said, there is a range of benefits to be had from employees’ being able to continue working for as long as they are willing and able. There are also considerable benefits for employers, so it is a win-win situation. 

Many employers are recognising the importance of retaining the valuable skills and experience of older workers to help them through and out of the recession. Research shows that older workers can bring qualities such as accuracy, commitment and punctuality to their roles, as well as having a more responsible attitude to health and safety risks, based on years of experience in the workplace. All those attributes are highly sought after and valued by employers across the board. 

I recognise that some among the roughly one third of employers who currently rely on the DRA have misgivings about managing without it, but my Department has worked closely with ACAS and a number of important stakeholders to provide fit-for-purpose guidance. Using that guidance will allow employers to go on managing their work forces without facing claims of unfair dismissal or age discrimination. 

The Government have laid the regulations to abolish the DRA so that older people will have far greater choice over when to end their working lives. They will now have the opportunity to work up to the age of 65 and beyond if they wish. In turn, that will boost the UK’s labour supply and contribute to economic growth.

Older people can bring a wealth of talent and experience to the UK’s labour market and it is quite wrong to dismiss those simply because a person has reached a certain age. For those reasons, I commend the regulations to the Committee. 

4.37 pm 

Ian Lucas (Wrexham) (Lab):  It is a pleasure to serve under your chairmanship, Mr Davies, and to hear the Minister set out his case. 

The proposal to abolish the mandatory retirement age has been under discussion for some time—indeed, the previous Government indicated an intention to consult on it. The proposal was discussed during the Equality Bill Committee, and amendments were tabled by various of its members. In a demographically changing Britain—and world—abolishing the mandatory retirement age is something that we should consider, and the Government’s consideration of the matter is sensible. 

The Labour party manifesto stated that it would support the abolition of the mandatory retirement age in due course. We undertook to take the measure forward following consultation, because there are profound implications for employees, who largely welcome the proposal, and for employers, some of whom have reservations and concerns. The Government’s position was made clear when the noble Baroness Wilcox stated: 

“We are committed to phasing out the default retirement age”.—[Official Report, House of Lords, 3 June 2010; Vol. 719, c. WA10.] 

Brendan Barber of the TUC said that, from an employee’s point of view, it could not be right that an employer should be able to sack someone for being too old. That bold statement is a very good way of putting the issue. 

However, we need to consider the implications of the proposal and I want to ask the Minister some questions. He gave some interesting statistics in his helpful speech. He said that since 2001, the work force aged over 65—I think I have noted the figures correctly—has increased from 412,000 to 870,000, which is an increase of more than 400,000 in fewer than 10 years. The number of people who are over 65 and are taking jobs in the economy has, therefore, increased very substantially. 

First, what assessment has the Minister made of the measure’s impact on the number of jobs in the economy? How many jobs must be created to provide employment for people aged under 65 to replace jobs that will be taken by those who choose to work beyond that age? Secondly, do the Government have any indication of the proportion of workers who are likely to take advantage? What will be the impact of the removal of the mandatory retirement provisions? Will more people continue to work because of their removal than would otherwise have done? 

When the measures were considered in the context of the Equality Bill—subsequently, the Equality Act 2010—the details were proposed largely by Back Benchers. The measures were not taken forward at that stage, however, because there was not the element of consent or the strong element of consultation necessary when such a profound decision is to be taken. 

The concerns that I have heard have largely come from employers, a number of whom have expressed concerns about in-work benefits. The Minister has referred to the exception concerning life assurance and provisions

that employers sometimes provide that relate to health benefits. Will he indicate in a little more detail what representations he has received from employers concerning such benefits? 

Benefits are often an important part of an employee’s contract. If an employer is to be disallowed from discriminating on the basis of age in provision of health benefits and life assurance benefits, that may influence him when he determines whether to offer that type of benefit in any employment contracts. Will the Minister indicate whether there will be total exclusion of the grounds of age when considering any disallowance of benefits that are included in such contracts? Will such exclusion lead to tribunal consideration of that particular area of law where those elements have not previously been considered? 

Compulsory contractual levels of retirement have been imposed in certain professions within the UK. In the past, for example, High Court judges were required to retire at a certain age. Can the Minister confirm that the provision will apply to all contracts that are in place at present? I recall that Lord Denning was still on the bench when the compulsory age for retirement of High Court judges was introduced. That measure did not apply to him because it was introduced only for those who were under the age concerned. He continued on the bench for many years—to the detriment, some thought, of his reputation. 

Certain types of professions or roles may particularly need individuals who have a particular proficiency or even physical ability. Can the Minister confirm that, if there is evidence that an individual cannot fulfil his employment requirements because his age has introduced some level of infirmity or inability to fulfil the role, an employer will be able to take steps to remove that individual, lawfully, from that role? 

4.45 pm 

Paul Flynn (Newport West) (Lab):  We knew that the Government would, one day, come up with a good idea. It has taken 11 months, but we ought to congratulate them warmly. I am also wearing the same badge as the Minister, so there really is an outbreak of unanimity in the House. 

I should declare an interest—as the fifth oldest Member of Parliament, I was slightly outraged to hear the Minister say that people must retire one day. Why? If people are still capable of doing a job, and they wish to do it, of course they should be allowed to continue. We have had the cruelty of outdated regulations, which were laid down in about 1945, when only a minority of people reached retirement age—and those who did, did not live long afterwards. But we have still been stuck with the regulations. 

I have a constituent who worked in the distinguished role of policeman for 30 years; he has now been retired for 36 years. Good luck to him, but he would have preferred to have it the other way around, working longer as a policeman. We have civil servants retiring at the ridiculously early age of 60; when they are approaching the prime of life and the best of their talents, they are cast aside. 

We know that to many people work is a drudgery and they welcome the opportunity to have a period at the end of life in which they have alternative activities to fill their time. However, for many people now, work is that core of dignity around which we build our lives. 

The measure is to be welcomed and encouraged, and we look forward to an extension. I point out that one of the many anachronisms in the law is that people in my position—past retirement age—who get the state pension, also stop paying national insurance. I have never understood that. If we are on the kind of income that we are on in the House, that is worth almost as much as the state pension. It seems unreasonable. The reason for the decision, which was made in 1945, was that if people got that far, they ought not to be paying into a scheme into which they had been paying for all their lives; they should be enjoying the benefits of it. 

People now, however, live about 20 years after retiring, on average. As we heard this week, they are much happier than people who are in the turmoil of middle age or younger. There should be a case for those earning more than £30,000 a year, for example, at least being able to have the opportunity of contributing to the national insurance scheme, from which they might still take many benefits. 

Finally, will the Minister explain why there should be a compulsory retirement age at some age? That is what he appeared to say. 

4.48 pm 

Lilian Greenwood (Nottingham South) (Lab):  As hon. Members have said, I am sure that the regulations will be welcomed by many older workers. 

I want to make the Minister aware of concerns expressed by members of the Derbyshire and Nottinghamshire chamber of commerce, when I met them a couple of weeks ago. All the evidence shows that, for most jobs, productivity does not decline with age. However, the chamber of commerce pointed out that, if employees’ performance has declined, that could be dealt with by moving them into standard retirement, enabling them to leave an employer with dignity. Some employers are concerned that, without a default retirement age, they might have to performance-manage older workers. That can be a difficult process, especially for those with long and loyal service with the employer, and it could have a significant impact on morale. That is particularly significant for a smaller employer, with everyone knowing the individual concerned. 

What advice and guidance would the Minister offer to the chamber of commerce and other such employers? 

4.49 pm 

Mr Davey:  I thank hon. Members for their questions. I will start with those asked by the hon. Member for Wrexham. I welcome his support for this measure. He asked what impact the measure will have on jobs and the economy. On page 46 of the impact assessment, there is a set of different forecasts on baseline growth, central growth and high growth. The impact assessment estimates that the increase in labour supply will be 6,000 in the first year, rising to 9,000 to 10,000 subsequently. 

The hon. Gentleman asked whether people would want to take the measure up. The survey evidence suggested that a third of people say that they want to work after 65. Some have argued that that will not have an effect on the labour supply because it will displace young people from the labour force, and part of the

research that went behind the impact assessment addressed that question in particular. It showed that that is not the experience in other countries. It is worth reminding people that the United States of America got rid of mandatory retirement ages in 1986 and Australia, Canada and New Zealand got rid of that type of regulation some time ago. They certainly have not seen that sort of problem. That is not surprising because, as I said, old and young employees tend not to be substitutes in the labour market; they are often complementary to each other. We believe that there will be a significant net increase in the labour supply. 

The hon. Gentleman went on to talk about what happened during the deliberations on the Equality Bill, and how this provision was not taken forward because of the need for consultation. I am sure that he is right about that, although this measure should have been introduced a long time ago, frankly; it has been a long time coming. He asked a specific question about in-work benefits, such as when employers provide a whole number of benefits as part of the employment package. As I said, the exception in these regulations covers only group insured benefits. It does not extend to other types of benefits, such as company cars. I hope that that gives him some reassurance. 

The hon. Gentleman asked what representations we had had on the exemption. In making provision for it, we are responding to representations, mainly from business and insurers that were worried that it could create problems. We were particularly worried about that, and we think that the exemption is justified. If we had not put that provision in, it could have undermined those group benefits and meant that they were withdrawn not only for older workers, but for all workers. The cost could have mounted and made them unaffordable. The exemption is in the interests of older workers and all workers. 

The hon. Gentleman then asked whether abolishing the default retirement age applied to all contracts today. I am sure that he is aware that it will still be possible to have a mandatory retirement age in a company, but it will have to be objectively justified, on grounds that are legal. The advice that we have given comes from ACAS. Because it is a complex area, we have stipulated that any employer that wishes to have a fixed retirement age, and seeks to justify that objectively, needs to seek legal advice. 

The hon. Gentleman also asked—and this partly relates to the question from the hon. Member for Nottingham South—whether employers will be able to ask someone to leave employment if their capability to do a job declines well before they reach retirement age or at retirement age. I absolutely stress that the ability to dismiss an employee fairly, under the ordinary fair dismissal rules, still applies. 

Section 98 of the Employment Rights Act 1996 sets out what an employer has to follow for a fair procedure and the reasons for which someone can be fairly dismissed. They include capability, conduct, redundancy, illegality or some other substantial reason. The issue of capability speaks to the hon. Gentleman’s point—employers can still use that legislation to ask someone to leave their employment if they are not up to the job. 

The hon. Member for Newport West said that this was the first good idea from the coalition Government, but I dispute that fiercely. He seems to think that the

triple lock for pensioners, ensuring that the pension goes up in line with prices or earnings, or by 2.5%—whichever is the highest—is not a good idea. I have to say, however, that it was a particularly poor policy on the part of the previous Labour Government to raise the state pension by 75p. Under our proposals, that will not happen again. I could talk at length about the good policies that the coalition Government have implemented and which the hon. Gentleman would surely welcome, but I think that Mr Davies would call me to order. 

Paul Flynn:  I will not discuss the benefits that those at my time of life had from the previous Government, because you will rule me out of order, Mr Davies. Will the Minister explain one thing? When the Prime Minister said, in the election campaign, that he was not going to cut the winter fuel allowance, people understood that to mean that he was not going to cut the winter fuel allowance. 

The Chair:  Order. I commend the hon. Gentleman’s ingenuity in trying to get a point in. The same applies to the Minister. We must, however, stick to the regulations before us. 

Mr Davey:  I will, of course, abide by your ruling, Mr Davies. 

I turn to the other remark made by the hon. Member for Newport West. He said that I said that everyone must retire, but I did not actually say that. I said, “Nevertheless, we all have to stop working at some point”. That may mean retirement, or that may mean going into a coffin; it does not mean that we have some new, higher, compulsory retirement age. I was suggesting that, although many people want to retire at some point, we will not force people to retire. That is why we are here today. I think that deals with the hon. Gentleman’s remarks. 

I come to the points raised by the hon. Member for Nottingham South. She rightly reflected a concern that a number of employers have about how they manage someone who has given loyal service to a company for many years and who is beginning not to be able to perform their job as they used to be able to. I have heard that before from a number of employers, but people’s productivity, by and large, does not decline with age. There is little evidence of that in the vast majority of jobs, although I accept that it may happen in certain jobs. I am happy to take on the point, and I recognise that it can be difficult for an employer when they are faced with someone who has given loyal service but is beginning to be less productive. 

To be honest, it is patronising for employers not to deal with that employee on how they are performing—it is slightly disrespectful. It may well be that that employee would like a conversation about how their duties can be changed or how they can be moved to fewer hours or lighter duties. Sometimes, some employers hide behind

fixed retirement ages so as not to grasp difficult issues. Yes, the regulations may require employers to performance-manage their staff, as ACAS discusses in its guidance, but that is a good thing—for the company, the employee and the economy. That is one of the reasons why the impact assessment is so clear that this deregulatory measure, although opposed by a small number of employers and one or two employee organisations, has such a positive impact. It will be positive for labour supply and it will be positive for productivity in general. 

Lilian Greenwood:  I thank the Minister for his response. He is absolutely right to say that employers need to think innovatively and creatively and, in this situation, to work with employees to improve performance or move them to lighter duties. In my experience, employers vary in how they deal with performance issues, from the very good to the not so good. Are the Government intending to bring forward anything to help support and guide employers so that they operate those systems effectively and in a way that leaves employees feeling supported? That would avoid an employee’s having suddenly to face disciplinary action after 20 years on the grounds of capability, leaving them feeling hurt and upset, and understandably so. 

Mr Davey:  Yes, we are doing, and have done, that. I refer the hon. Lady to two pieces of guidance available on Government websites, as well as to the Employers Forum on Age, which very much supports the Government on this. Its members include many FTSE 100 companies, as well as other organisations. The first of the two pieces of guidance is the ACAS guidance, which I have mentioned and which was a result of consultation with employers. It will help many employers if they are having problems. 

The other piece of guidance is that which the Department for Work and Pensions has put on its website, which looks at all the best practice already out there for performance management, particularly in the area of older workers. Whether it is the guidance on how to manage the legal side or the guidance that shows best practice, or whether it is the fact that many, many employers—the majority, in fact—already manage the issue without any problems, employers have those resources to go through, which will deal with any concerns that they still have. 

This has been a useful discussion and I hope that it has convinced some of the doubters that we are taking the right approach. For those reasons, I commend the regulations to the Committee. 

Question put and agreed to.  

Resolved,  

That the Committee has considered the draft Employment Equality (Repeal of Retirement Age Provisions) Regulations 2011. 

5.2 pm 

Committee rose.