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Hidden dangers of default retirement age

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Hidden dangers of default
retirement age

Government has announced that the default retirement age will be scrapped from
October next year amidst warnings that dropping the default retirement age may
have unintended consequences.

The haste
with which this is being introduced will add to the risks says Tony Clack,
Managing Director of Retirement Specialists Laterlife Learning: “On the face of
it this, change has advantages for us all as individuals; more control over
when we want to retire, less likelihood of being forced out on irrelevant age
grounds and more control of work/life balance if employers also introduce
flexible working policies. However, this change represents a huge discontinuity
in what we all understand by retirement and has considerable risks”.

According to Mr Clack, the single biggest
consideration for organisations is possibly financial and what this will mean
to an organisation if it no longer has the safety valve of being able to let a
proportion of staff go with no redundancy costs.

On the positive side, this change automatically
ensures that organisations will have to focus on getting rid of the least
effective staff rather than the oldest and putting more emphasis on ability
measures and proper performance management.

Assuming the removal of default retirement age does
result in an overall increase in older people working longer, then
organisations may have a succession problem e.g. less opportunity for younger
managers, causing an outflow of talent or at least tensions between young and

Possibly even more dangerous is that if there is
covert age discrimination and age stereotypes aren’t overturned within
organisations, then rather than encouraging older workers to continue for
longer, we could see the reverse. Organisations may find ways to shed workers
before they get ‘too old’ and become less likely to recruit older workers
because of perceived cost, performance and health issues and the subsequent
difficulty of agreeing their exit.

Conversely we could see higher rates of youth
unemployment, especially in difficult times, because younger workers are likely
to be cheaper to make redundant. “If organisations also adopt a flexible
working approach i.e. the ability to gradually cut down from 5 days to 4 days
to 3 days etc. over a period of years, so people can adopt portfolio
lifestyles, then this in our view is the one thing that could avoid some of the
above problems and make this change beneficial all round,” says Mr Clack.
“However, managing flexible working does add to the management challenge.”

Mr Clack says he knows from research that in most
organisations little dialogue currently goes on about retirement until the time
is close and that many younger managers are already ill equipped to understand
the issues for someone facing retirement. “As retirement, or
interim-retirement, will now become more of a lifestyle choice, organisations
will need  to ensure that dialogue about retirement goes on throughout an
individual’s career so that it is an accepted topic for discussion and
incorporated into their overall career planning,” he said.

“The most important thing is that the potential issues
and implications of this change are widely debated. However, the consultation
process is going to be short which will make it that much harder to achieve

4 August 2010

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