'Crass and stupid' removal of DRA leaves 'huge potential timebomb'

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Abandoning the default retirement age was ‘crass and stupid' and has left a ‘huge potential timebomb for UK businesses', according to employment experts.

The coalition government has also been accused of ‘blundering around in the dark' following the DRA's removal.

However the Seldon ruling has introduced some clarity for organisations wishing to maintain an employer justified retirement age.

Penningtons Solicitors associate Tim Randles told the Jelf Employment Seminar that businesses were left with no alternative but to do nothing about the new rules because they had not been given enough information or time to plan.

"Nobody knows what to do and therefore nothing is the only alternative," he said.

"And I think we are heading for a car crash because it's not going to happen immediately.

"A lot of organisations got rid of their old folk - they did it before the DRA was removed - so in a sense we are in an artificial time line.

"The problem is we are heading towards an increasingly aging work force with no mechanism to control it.

"Abandoning that DRA without thinking it through was crass and stupid and we now have to deal with the problem," he added.

And Randles criticised the coalition response since enacting the move.

"The government is blundering around in the dark," he continued.

"I thought New Labour was bad when it came to economy, but this lot are determined to throw the baby out with the bath water.

"Don't abandon the DRA and then say ‘oh we'll think about the rest'."

However, he noted that the Seldon retirement ruling had helped employers who want to manage workforces more closely.

"The thing we draw from this judgement, which is very important and useful, is that there is a distinction between things that are unilaterally imposed and things that have been agreed," he said.

"If a person has benefited from a clause in the early days of their partnership, they should take the downsides later on.

"A lot of cases in Europe are about workforce agreements, so maybe setting a retirement age by reference to consultation with everyone signing up to it could be the way through," he added.

Jelf Employee Benefits head of benefits strategy Steve Herbert backed Randles view and noted one of the key determinants to someone retiring was their level of pension savings.

"If you can't objectively justify retiring people at a certain age you have to rely on them to have enough retirement savings to want to retire," he said.

"If you look at Seldon in particular - his gripe was that he didn't have enough pension savings to retire.
"What underpins their retirement plans, although some will have their own company private scheme, is the state pension schemes.

"But if the state pension isn't going to be paid until age 67, 68, 69, 70 or older as it keeps increasing, then people are not going to be able to afford to retire, and this is a huge potential timebomb to UK business and its something that all of us need to start thinking of.

"We need to encourage employees to save more so this timebomb is not so keenly felt and as employers we need to find ways of putting money into pensions schemes and to communicate it better," he concluded.

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