Sarah Chilton: No more DRA, but no guarantee of work after 65

The age of 65 - for so long associated with retirement from work - has just lost much of its cachet as one of the most significant stages in life's journey.

From this month, the default retirement age (DRA) has been abolished, meaning that, with a few exceptions, employers will no longer be able to compulsorily retire someone simply because that person has reached their 65th birthday.

The legislation is down to a combination of various contributing factors - eg increasing longevity, a desire by many in their 60s to continue working and a desire by the government to increase the age at which retirement from work becomes "normal". Iain Duncan Smith, the work and pensions secretary, claimed recently that most workers want to work on when they reach 65.

Therefore, compulsory retirement at the age of 65 will now apply only to those who are due to reach this age before 1 October 2011 and only if the employer has complied with the statutory notice requirements. Effectively this means that an employer must have given notice of retirement before 6 April for 65 to still be the retirement benchmark.

Some companies might still have, in the jargon used by the legislation, an "employer justified retirement age" but there are no concessions to company size as is sometimes the case with employment legislation. Every employer, no matter how small, who decides to implement an employer justified retirement age policy will need to be able to justify that decision because an employee who is dismissed on reaching 65 could still challenge their employer's decision to have a retirement age in the first place.

Whether an employment justified retirement age will be considered reasonable in the eyes of the law will depend on several factors relating to each individual company. These will include health and safety issues; the training requirements of a particular role; or future workforce planning.

For example, a company primarily employing people to do manual work may be able to justify a policy which compels all employees to retire at 65 on the grounds of health and safety, whereas this might be more difficult in an office environment where the workers sit at desks all day.

For businesses without an employer justified retirement age, dismissing someone who is 65 or older will only be lawful if the employer has a fair reason for that dismissal. "Fair" can be objectively justified on certain - non-age related - grounds, for example, poor performance, ill health or unacceptable behaviour towards managerial staff, other colleagues or clients.

In the wake of the new Act it is predicted that there will be a rise in sackings for these reasons as a result of employers not being able to dismiss someone just because they reach 65.

Therefore employers need to be careful that, if deciding to dismiss an older worker who is not performing well because of health problems, they are not seen to discriminate against that person on the grounds of a disability.

Employers will have to walk a very thin tightrope - ie justifying dismissal at 65 and at the same time being careful not to be seen to victimise older workers, or those with a disability.

Meanwhile the number of employees exercising their option to carry on working after 65 is likely to be fairly substantial, particularly in the private sector. However for the reasons stated above, they cannot presume that their bosses will not find a way to (legally) circumvent the legislation and, therefore, working after 65 is not guaranteed.

Therefore any individual considering retirement options should not base their plans on the presumption of being permitted to work beyond 65 - despite what the law says.

The impact extends beyond employment law, to areas probably not yet entirely understood but certainly will have implications for pensions, employee share schemes and also for actuarial calculations for personal injury and other claims. l Sarah Chilton is an employment lawyer with Murray Beith Murray based in Edinburgh.