Lift the jobs axe for the over-65s, demands an MP’s all-party committee. They say that employers should no longer be able to just sack older workers who want to stay on at work. And, making them finish working effectively means that they have to buy a pension annuity.
The legal right that companies have to retire staff compulsorily on their 65th birthday must be abolished now to help address the deepening pensions crisis we are witnessing, a parliamentary investigation has concluded. A new report into pensioner poverty by an all-party group of MP’s recommends that older people should be able to continue working full time or part-time into their 70s, 80s or even their 90s so long as they are both fit and able to do so.
These recommendations, coming from the Commons work and pensions select committee, to be published in July, are a response to fears that many of the next generation of retirees could end their retirement years in poverty after being forced out of work at 65 with pension funds that have plummeted in value. For those approaching retirement today, the financial crisis and recession have left them with potential pension annuity incomes of some 20% less than would have been the case only twelve months ago and with people having no right to carry on working to make up the difference in income.
The committee’s conclusions will be fiercely resisted by business leaders who are determined to retain their right to shed staff at age 65 and replace them, where appropriate, with younger, cheaper workers. Last night the committee’s chairman, the Labour MP Terry Rooney, said the government had to recognise that the current law not only discriminated against these older workers, but also risked making the pension crisis even worse. There are an increasing number of people now reaching pension age who are finding that their pension funds are nothing like as big as they expected them to be, and they will get to a situation where their employer is able to sack them at age 65 and no other employer will take them on.
The need for some urgent action on pensions was highlighted last week by a series of alarming new reports about the state of the pensions industry. A survey of 1,000 blue-chip companies by PricewaterhouseCoopers (PwC) found that 96% believed their final salary arrangements were unsustainable. At the same time, the Organisation for Economic Co-operation and Development (OECD) put Britain at the bottom of a league table of what those people coming up to retirement can expect in terms of retirement income.
The Department for Work and Pensions (DWP) has said that it would not review the compulsory retirement age until 2011, but this is a date that campaigners say will be too late for the 25,000 or so people forced to retire against their will each and every year. Already ministers have announced that the retirement age will actually be increased in phases to 68 by 2048. At the moment, a UK employer can dismiss a member of staff without any redundancy payments on his or her 65th birthday. Employees do, though, have a right to request to work beyond age 65, but employers have only to “consider” the request.
In 2006, the charity, Age Concern, applied to the high court arguing that these age 65 rules were illegal. Its case was referred to the European Court of Justice, which ruled in March this year that compulsory retirement at age 65 was not in breach of EU law so long as the UK government was able to justify it. It will now be up to the high court to determine later this year whether the rules are “legitimate” or not.
Independent pension expert, Dr Ros Altmann, has said that the financial crisis we are witnessing meant that people now approaching retirement were doing so with their pension and other assets down in value, annuity rates falling, and government policies working against them. She stated that if people wanted to supplement a disappointing annuity income with some part-time work, current policies actually penalise you from doing so, both through age discrimination legislation and the UK pension credit system.
