Retirement — Question for Short Debate

Part of the debate – in the House of Lords at 7:27 pm on 13 January 2009.

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Photo of Baroness Greengross Baroness Greengross Crossbench 7:27, 13 January 2009

My Lords, the Employment Equality (Age) Regulations 2006 implemented a European directive which outlawed age discrimination in employment and adult education. However, the regulations introduced a national default retirement age as an exception to the general principle of non-discrimination on the grounds of age. This means that it is lawful for employers to operate a mandatory retirement age of 65, in effect getting rid of people automatically just because they are deemed to be too old to do a job. There is provision for an appeal, but the effect remains that if an employer wishes to terminate someone's employment at 65, normally it will happen.

A recent survey by the Chartered Institute of Personnel and Development with KPMG suggests that in the current economic climate, almost one in five employers said that they were going to enforce the retirement age of 65 more vigorously. That means that even more people will be turfed out of their job on the assumption that they are too old, regardless of whether they are or not.

When the regulations came into effect, the Government justified the default retirement age at 65 for the next five years as a legitimate aim of social policy on the grounds that it assisted employers in manpower planning, but they committed to review the arrangements in 2011. At the time, this annoyed many older people, who pointed out that they would be too old—more likely dead—by then.

The review will look at the extent to which employees' right to request to stay at work beyond 65 will have created a culture which reduces reliance on the old-style cut-off date of retirement. It cannot be right that, on one day, you are a person with a job, status and the recognition that goes with it, and that, on the next, you have a 65th birthday and, just because of it, you lose the lot. However, to change this culture is a formidable task, but we have to take it on board. Equality legislation should be precisely that. As a commissioner at the Equality and Human Rights Commission, I believe that the default retirement age is a serious blot on our equalities landscape. Discrimination is not acceptable in the case of gender, race or disability; it should not be in respect of age.

I am aware, however, of understandable concerns of bodies such as the Engineering Employers Federation, which argues strongly that any change to current arrangements will adversely affect the UK's competitive position and that, fearing expensive litigation, some employers will retain older workers who are not the best people for a job. They believe also that removing the default age of retirement will undermine workforce morale and result in "dead-men's-shoes" succession planning problems. They believe also that management time would be diverted to dealing with industrial tribunal cases brought by disgruntled workers, whatever their age, whose performance had been deemed unsatisfactory. However, I strongly believe that in a country where we are promoting equality as a societal norm we must find ways of addressing these concerns rather than allowing them to be used as a means of retaining the unjust system currently in place.

Any good employer should have in place an appraisal system that ensures that its employees are competent and meet their delivery targets. Surely this is even more important in the current economic climate. However, if after appropriate support and training an employee, whatever their age, fails to deliver, it is surely for the good of the organisation and its other employees that an employer should consider whether to retain that employee in the workforce.

It is this test of competence, through annual appraisals, that gives us the way forward for removing the DRA. It is not easy for a young manager to tell an employee who is the age of his father or perhaps his grandfather that he or she is no longer competent to do the job that they have been doing for years. If companies' appraisal systems are applied properly throughout an organisation to employees of all ages, those people who are able to contribute effectively to the success of the organisation can do so whether they are 25 or 65.

Those who express concern make a good point about the termination of employment of long-standing workers who would under present arrangements retire perhaps with a clock and some good will, but who might be perceived under a new regime as having been sacked for incompetence. I would expect employers to maintain morale by recognising years of loyal, good service, as many do now, through measures such as long-service awards and retirement presentations, but they must be based on performance, not on age.

If competence becomes the test by which to determine continued employment, certain benefits would stem from the abolition of the default retirement age. First, companies would retain existing talents within their workforce without the need at considerable cost to recruit and train new people to replace those who currently retire at 65 and to cover their posts while the recruitment and training process is under way. The Chartered Institute of Personnel and Development estimates that the average cost of replacing a manager or professional person is £10,000, so it is quite expensive. Secondly, it would help address the ratio of workers to non-workers in our population, which, without action, is forecast to become 54.7 inactive people over 65 for every 100 workers by 2050. It is an issue of which I am very well aware as chief executive of the International Longevity Centre. Thirdly, and perhaps most importantly, it would help address the growing pensions crisis by extending some employees' working lives and enabling them to contribute more money to their pension schemes, which was one of the key recommendations of the noble Lord, Lord Turner, in his review of pensions policy. Fourthly, it would provide an opportunity to raise more revenue if national insurance contributions and direct taxation were to be applied to earned income irrespective of the age of the worker, a policy which seems justified on grounds of equality if the argument for abolishing the default retirement age is based on equality.

A number of substantial employers, and the Government in respect of the Civil Service, are already implementing no-mandatory-retirement-age policies; for example, B&Q, Defra, the DCLG, Hertfordshire County Council, HM Revenue & Customs, M&S and Sainsbury's and many more. All have adopted such a policy; it works for them; and, in many cases, customers are recorded as welcoming being able to ask an older employee, especially somewhere like B&Q, "Which is the right screwdriver?" and "What do I do if I want to put up some shelves?"—I know that I have been in that position myself. It is very helpful to ask someone who has done it for many years.

We need to change our thinking so that employees are treated on an equal footing throughout their working lives, with the same opportunities to progress and the same requirement to show competency to deliver at the age of 65 as at the age of 30. Chronological age is an inadequate proxy for capability. Some people are over the hill at 35; but some are competent, quick-witted and innovative at 65, and the cost of losing such talent is unacceptable. In the future, our society will be judged by its basic fairness and humanity, especially in a period of economic downturn.