Grey army 'will squeeze out young staff' as automatic retirement axed

PLANS to stop workers being forced to retire at 65 will create an army of OAP employees, but put even more pressure on an already struggling jobs market, experts have warned.

UK employment relations minister Ed Davey said ditching the default retirement age, which is to be phased out from October, was "great news" for older people, businesses and the economy.

There are 850,000 workers aged 65 or over in the UK. Under the new plans a further 6,000 are expected to carry on working each year.

Ray Barrell, director of macroeconomic research at the National Institute of Economic and Social Research, said: "There will be a chain of causation which is more likely to be felt by young people.

"The effect will ripple down and be felt most by anyone looking for a first job, especially the young and unskilled, anyone wanting to retrain or those working in sectors where there is a high turnover."

However, Mr Davey said: "I'm afraid those people who seem to think there is a displacement between young and older people here, firstly are not reading the evidence, and secondly they have a very old fashioned approach to labour supply, as though there is a fixed amount of jobs in the economy.

"That clearly isn't the case … this will actually boost the number of jobs in the economy."

Employers want the move to be delayed for at least a year as they seek greater clarity to the possible repercussions, in particular the rights bosses will have when dealing with older workers who they believe are no longer up to the job.

Mr Davey said guidelines published yesterday should reassure bosses that they will still be able to carry out performance appraisals and fairly dismiss workers who cannot do their work to the required standard because of their age.

The announcement coincided with yesterday's publication of the Pensions Bill, which includes raising the state pension age to 66, as announced by Chancellor George Osborne in October's spending review.

David Lonsdale, assistant director of CBI Scotland, said: "The guidance for employers on working without the default retirement age is too little, too late.

"The impact on employers, especially smaller ones, will be considerable. There is not enough clarity for employers on how to deal with difficult questions on performance.

"Less than three months is not enough time for businesses to put in place new procedures. The outcome will be more unpleasant and costly legal action."

Mr Lonsdale added: "Employers accept that more people will want to work beyond 65 as the population ages, but the government has not recognised the fundamental question, which is how employers should manage retirement on the basis of a performance appraisal. This will be particularly acute in physically demanding sectors."

However, Dr Ros Altman, director general of Saga, a company providing a range of services for the over-50s, said: "Some argue that forcing older workers out will create more jobs for the young.

"This is a misguided argument. In fact, as the baby boomers come up to 65, if they do not keep working, economic output will be lost and increasing numbers of older people will have much less money to spend.

"If they are forced to live on meagre pensions, then they will not provide the spending needed to create jobs for younger people."