The default retirement age is simply not needed, says Chris Ball, who shares his thoughts on why scrapping mandatory retirement can be extremely beneficial to organisations.
The case for or against mandatory retirement is not just an HR issue. It involves the individual worker and the national and international economy as well as the organisations in which people work. Let’s start with the economy. In Britain, as in other developed nations, our population is ageing rapidly. The ratio of people of working age to those of retirement age – what demographers call the dependency ratio – will dramatically deteriorate over the next few decades. There will be a fairly sudden change as the baby boomer generation hits retirement age. The tipping point is close and the implications for our national productivity, economic growth and tax and revenue policies are important.
Hence, in economic policy terms, there is no doubt that the UK’s best interests lie in extending working lives. All this was reflected in the First Report of the Pensions Commission issued in 2004 (the Turner Report) which took the view that a rise in average retirement ages was needed. People had to stay in work longer. Following this in May 2006, the government announced a staged increase of state pension age (SPA), to progressively equalise male and female SPAs to 65 from 2010 and then to 68 for all between 2024 and 2046.
In a survey by The Age and Employment Network (TAEN) and the Employers Forum on Age, we looked at employers with and without mandatory retirement age policies. We found that the benefits of enforced retirement had been exaggerated, whilst the problems of operating without them had been magnified and were being easily overcome.
One argument for the National Default Retirement Age’s (NDRA) introduction was that a set retirement age helps workforce planning. Sure enough, 81% of employers applying the NDRA said that it made succession and manpower planning easier. Against that, 19% of employers with mandatory retirement said the opposite, and of those who had abolished mandatory retirement, 71% said that this had created no problems.
Performance management
Another argument for the NDRA was that it would help employers deal with older employees whose performance was below par. Many employers who have adopted the NDRA, however, say they don’t dream of using it to deal with the older under performer. Forty seven per cent said that yes indeed, these employees could be moved on without the use of disciplinary or competency procedures but 53% said that their organisation had not benefited from this approach.
Other elements in the survey make some telling points too, for instance, 32% of employers following the NDRA said that it has helped improve performance in some way, but 68% disagreed. In addition, 81% of employers using the NDRA said that their policy has not had a positive impact on their organisation’s image. Added to that, of those following the NDRA, 64% said that it has led to a possible loss of talent to their organisation, 37% recognise the possible risks from demographic factors, 45% said it has lost them the opportunity to be employers of choice among older and mid-life workers, and 74% say it has had an adverse impact on employees who would prefer to work on.
The evidence suggests then that the NDRA is simply not needed. Some organisations will use it if they have it, but in many cases it seems not to be used and in some, it is positively dysfunctional. Organisations which have abolished mandatory retirement on the other hand seem to cope perfectly well and say that it is beneficial. HR professionals concerned with keeping skills and knowledge in the organisation will certainly wonder why capable people should be obliged to retire before they need to do so.
The fact is that many people find they do not want to give up work or cannot afford to do so simply because they have reached 65. Many are saying, "what actually is the point of retirement if a person is happy and able to work on?" Of course, there are many issues about the nature and process of retirement that can be considered too; it goes without saying that older workers can often continue longer if they are able to work more flexibly, for example.
Many 65-year-olds feel they have a lot to offer, are physically and mentally alert, and can carry on for quite a while yet. Many employers agree. Some of those operating the NDRA said that they agree to all requests to work on! What then, I ask, is the point in having a mandatory retirement policy at all? In my view, we ought to get rid of it now and earn our professional reputations by demonstrating how everyone can be a winner.
Chris Ball PhD, Chartered FCIPD, is chief executive of TAEN, a leading national network of 240 member organisations committed to creating an effective job market which works for people in mid and later life, for employers and for the economy. TAEN champions the contribution that age diversity in employment makes to business success and a healthy society.
See also Matthew Lawrence’s article on the benefits of having a default retirement age.
2 Responses
Default retirement age
I agree with HR Spy. Whilst recognising that many older people are unable to retire early because of the credit crunch and its impact on pensions, there is a real need to invest in developing the skills and capabilities of younger people. In the longer term it is the young who are the key to our future prosperity.
With more graduates than ever on the job market (and with large student loans to repay) businesses need to be innovative and identify ways to provide training and work experience so that they are able to fulfil future critical roles in organisations. And at the same time offer more practical skills training to the less academic.
Hilary Jeanes
http://PurpleLineConsulting.co.uk
The default retirement age is simply not needed
Chris Ball seems to ignore the current state of the economy and the inherent need to create new jobs for school leavers and graduates. is the 2004 Turner report still relevant?
HR Spy