Retirement Procedure

First published on Friday, Mar 11, 2022

Last updated on Friday, Jun 07, 2024

As a business owner, it's inevitable that your employees will eventually choose to retire. So as an employer, you need to understand your legal obligations surrounding retirement and how you can support retiring employees.

Failure to act legally and forcing your employees to retire can lead to claims being raised against you to an employment tribunal.

In this guide, we'll discuss the procedure for retirement, if you can force your employees to retire, and how to support retiring employees.

What is the Retirement Age in the UK?

There is no retirement age in the UK. Formally the "default retirement age" was 65 - however, this was scrapped in 2011 and no longer exists. This means that you can no longer actively plan for employees to retire when they get to a certain age.

Can You Force an Employee to Retire?

No, you cannot force your employees to retire when they hit a particular age. However, an employer can enforce a compulsory retirement age if there’s an occupational requirement. So as an employer, you need to understand what it is and when it can be used.

What's a Compulsory Retirement Age?

A compulsory retirement age is when it's legally allowed for employers to tell employees they must retire. This is typically to ensure their safety, but there must be a good reason why. For example: * The job requires a certain set of physical abilities - such as in the construction industry. * The job has a certain age limit set by law - such as the fire service. * So you must understand how to justify a compulsory retirement age if it needs to be enforced in your company.

How to Justify a Compulsory Retirement Age

To justify a compulsory retirement age, you need to show proportionate means of achieving a legitimate aim. Basically, you need to be able to objectively justify your reasons to avoid claims of unfair dismissal and age discrimination being made against you.

You need to answer the following questions: * Do you have hard evidence which can justify your reasoning? For example proof of safety concerns. * Are there non-discriminatory ways of achieving the same results? For example, can you simply change their job role.

Does an Employee Need to Make You Aware of Their Retirement Plans?

No, the employee doesn't need to make you aware of their retirement plans.

If older employees are mentioning to you in passing about potentially retiring in a year or two's time, you shouldn't take such discussions as their notice period.

What is the Procedure for Retirement?

If you do have a compulsory retirement age in your company, there is a procedure that you must follow. Such as:

  • You must give the employee plenty of notice of when you intend to end their employment.
  • You must arrange a meeting to discuss their retirement date. You must be able to prove why a compulsory age is reasonable.
  • You must listen to and consider any request they have to continue working past the compulsory retirement age.
  • You must allow them to appeal if they don't agree with your decision.
  • You must give the employee plenty of notice of when you intend to end their employment. They should already be aware of your retirement age policy.

How to Support Employees Who Are Retiring

As an employer, you should support employees who are choosing to retire. You can do this by:

  • Providing staff with counselling or financial advice.
  • Allowing them to reduce their working hours for some time until their retirement date.
  • However, if the employee chooses to reduce their working hours, it could reduce how much pension they receive.

Can Employees Receive Pension Whilst They're Still Working?

Yes, if the employee chooses to work past the state pension age of 66 then they can still receive their pension. However, they must be of state pension age or agree on a different age with their pension provider.

Let's discuss how working past the pension age can affect the different types of pensions.

State Pension

If the employee delays when they receive their state pension, they'll get a larger weekly payment.

Workplace or Private Pension

If the employee has a workplace pension scheme in place with you, reducing their hours could reduce how much they get.

You should make this clear to your employee if they choose to work past the state pension age.

Do Employees Have to Pay National Insurance if They're Still Working Past State Pension Age?

No, if an employee works past the state pension age - they don't pay national insurance. You should clearly explain this to your employees if they choose to work past 66.

Do Employees Have to Pay Tax if They Work Past State Pension Age?

Employees will only have to pay income tax if their total income (including their private pension and state pension) is more than their tax-free allowances. You should make your employees aware of this when they reach state pension age.

What Happens if You Treat an Employee Unlawfully?

If you choose to treat your employees unlawfully and force them to retire, they may choose to raise claims of discrimination and unfair dismissal against you.

If found guilty. you may be hit with heavy financial and reputational damages. You should avoid acting unlawfully at all times.

Get Advice on Retirement Procedures with BrightHR

When you run a company, your employees will choose to retire. So it's vital you understand how to act legally and ensure you avoid discrimination.

Failure to act legally and forcing your employees to retire can lead to claims being raised against you to an employment tribunal.

If you need any advice when employees retire, we are on hand to help. Our BrightAdvice helpline. Give our friendly and helpful team a call on 0800 783 2806

Jenny Marsden

Associate Director of Service

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