Retirement changes are on the way


Controversial plans to raise the retirement age in the UK are likely to be announced soon, but the government is split on how far the changes will go.

An European Employment directive giving give full employment rights to people who want to continue to work beyond the age of 65 is due to come into force by October 2006, forcing the UK to abolish compulsory retirement at 65. But the cabinet is split over whether to raise the retirement age to 70 or scrap it altogether.

Trade and Industry Secretary Patricia Hewitt wrote in a leaked letter that there "has not been consensus" on the issue and that there were still "different perspectives" - Whitehall doublespeak that reveal the extent of the divisions.

Ms Hewitt favours raising the compulsory retirement age to 70, while Pensions Secretary Andrew Smith wants to see the compulsory retirement age abolished altogether.

In an interview with People Management magazine earlier this month, Pensions Minister Malcolm Wicks, who works under Andrew Smith, said that a compulsory retirement age ought to be thrown into "the dustbin of social history" and that forcing productive people to retire because they had reached 65 was “ridiculous”.

“We must counter conservative instincts from employers, including the public sector, which can be as traditional, staid and inflexible about age issues as the private sector can be,” he added.

But neither proposal will affect the age at which people can claim their state pensions, which will remain at 65 - at least not yet.

The proposals have raised the hackles of both business leaders and unions. Employers believe the change will lead to a flurry of age-related employment tribunal cases and that it would become almost impossible to retire staff who were no longer able to do their jobs properly.

For their part, unions say that the proposals will mean many people working until they “literally drop”. Last week, the TUC warned that one in five people in the UK – and almost one in three men - would die before they retire if the government pushes up the state pension age to 70.

Unions also fear that the changes will be used as a backdoor way to force people to work longer and would soon be followed by the raising of the state pension age.

The TUC said that while it supports the abolition of the retirement age, it will oppose anything that smacks of increasing people’s retirement age by the back door.

But the economic arguments for change look irresistible. Lifting the retirement age to 70 would raise an additional £10 billion in taxes while raising the state pension age to 70 would save a further £10 billion.