Department for Business Innovation & Skills Department for Work and Pensions Phasing out the Default Retirement Age

Transcription

1 Department for Business Innovation & Skills Department for Work and Pensions Phasing out the Default Retirement Age Response from The Pensions Management Institute

2 - 2 - PMI s response to the consultation from the Department for Business Innovation and Skills / Department for Work and Pensions: Phasing out the Default Retirement Age Introduction The Pensions Management Institute (PMI) is the professional body for people working in the pensions sector. The PMI s members (currently over 4,200) work as pensions managers, consultants and technical specialists in consultancies and insurance companies. Many are also actuaries, pensions lawyers or company secretaries. Their experience is therefore wide ranging and has contributed to the thinking expressed in this response.

3 - 3 - Response form and consultation questions The closing date for this consultation is 21 October You can complete this response form online through Survey Monkey: Alternatively, you can , post or fax completed response forms to Martin Payne at the Department for Business, Innovation and Skills (BIS): draconsultation@bis.gsi.gov.uk Postal address: Workplace Equality Unit, Employment Relations Directorate Department for Business, Innovation and Skills 1 Victoria Street London SW1H 0ET Fax: The Department may, in accordance with the Code of Practice on Access to Government Information, make available, on public request, individual responses. Name: Tim Middleton Organisation (if applicable): Pensions Management Institute Address: PMI House 4 10 Artillery Lane London E1 7LS Please state if you are responding as an individual or representing the views of an organisation, by selecting the appropriate group. If responding on behalf of a company or an organisation, please make it clear who the organisation represents and, where applicable, how the views of the members were assembled. Please tick the box below that best describes you as a respondent to this consultation: Business representative organisation/trade body Central government Charity or social enterprise Individual Large business ( over 250 staff) Legal representative Local government Medium business (50 to 250 staff) Micro business (up to 9 staff) Small business (10 to 49 staff) Trade union or staff association Other (please describe):

4 - 4 - Consultation questions A1. The Government intends to remove the Default Retirement Age. Do you agree that Schedule 6 of the Age Regulations (which deals with notifications of retirement and the right to request to work past retirement age) should also be removed? Yes [ ] No [ ] A2. If you disagree, please explain why: B1. If Schedule 6 is removed, the laws on unfair dismissal and age discrimination will still apply. Do you have any concerns about how these laws would operate in the absence of Schedule 6? Yes [ ] No [ ] B2. If you have concerns, please describe them: C1. Thinking about retirement discussions between an employer and an employee, do you think it would be useful to have: [ ] Formal guidance on how to discuss retirement in a mutually beneficial way [ ] A statutory code of practice, including guidance, which covers retirement discussions [ ] None of the above [ ] Something else (please state below) C2. Please explain your answer: It will commonly be the case that the end of employment will coincide with eligibility to draw benefits from a registered pension arrangement. This will involve the employee having to make a number of critical decisions such as: Can he or she defer taking benefits? In what form may benefits be taken? What is the most suitable form of annuity? Is eligibility for any form of benefit affected by age? So that employees (and employers) can identify specific legal rights and responsibilities in a precise way, it will be of mutual benefit for a formal code of practice to exist.

5 - 5 - C3. If you believe that additional guidance or a code of practice would be helpful, what topics do you think should be addressed? For example flexible retirement options, changes to duties and working hours, etc. For operational reasons, occupational pension schemes need to set a Normal Retirement Age (NRA). This is commonly the age at which a target benefit is achieved, and had a statutory significance in the pensions tax regime before that which was established by the Finance act For scheme design purposes, it is important that some form of NRA is retained, and it would be useful for a code of practice to acknowledge this and that it is separate and distinct from the Default Retirement Age. D1. Do the proposed transitional arrangements strike the right balance between the policy aim of quickly phasing out the Default Retirement Age (and realising the benefits of doing so) and respecting the position of employers who have already made plans based on its use? Yes [ ] No [ ] D2. If no, please explain your answer: E1. Responses to an earlier call for evidence on the Default Retirement Age raised possible impacts on insured benefits and Employee Share Schemes if the DRA is removed. If relevant, please describe any concerns you have below: Historically, it has been the practice for many employers to provide life cover for their employees. This has been done through a registered pension scheme, or since the IORP Directive was enacted through Section 255 of the Pensions Act 2004, through a separate trust-based arrangement. To control costs, such schemes have established upper age limits for eligibility; the nature of life assurance means that it is significantly more expensive to insure the lives of older employees. If the cost of maintaining such schemes were to become prohibitively expensive because of a statutory requirement not exclude employees on grounds of age, the pragmatic response of employers would inevitably be withdraw cover for the workforce as a whole. This would not serve the greater interest. We believe it would be in the best interests of the majority of employees if some form of exemption or other easement were to apply to the provision of employer-sponsored life assurance schemes.

6 - 6 - E2. Is any action, such as additional guidance, needed to address either of these issues? [ ] Yes insured benefits [ ] Yes share schemes [ ] Yes both [ ] No Please explain your answer below: Please refer to answer to E1. **** **** ****