Aon Consulting supports European Courtís decision to allow mandatory retirement policies in UK

The European Court of Justice today ruled on Heydayís legal challenge against mandatory retirement policies. This ruling confirms that a Member State is able to apply national laws, including setting a compulsory retirement age, when implementing Regulations that comply with the European Equal Treatment Framework Directive (Directive 2000/78). However, any differences of treatment on the grounds of age would need to be objectively justified and considered a proportionate means of achieving a legitimate aim.

Matthew Lawrence, Senior Consultant from Aon Consulting a leading employee risk and benefits management firm comments:

ìThe flexibility provided to employers by this decision is a positive step in light of the financial pressures facing companies today. It allows UK companies the option to force retirement on employees aged 65 or over, where the cost of benefits such as healthcare and long-term disability increase. It also allows, though, the option to keep staff over the age of 65 years old in employment, recognising the valuable resource they can be to companies.

ìFlexibility is the key here, however this ruling is not necessarily the end of the saga as the matter will now be referred back to the UK courts. If the government is not able to justify the policy of allowing employers to forcibly retire workers aged 65 and over, this will have a major impact for employers.

ìUK employers are likely to have only been given a short respite if, as expected, the default retirement age is either increased or removed completely in a Government review likely to be completed in 2011.

ìWorkers over 65 years old are often an invaluable resource of knowledge and experience, something sorely needed during these trying times. We donít expect to see employers culling their workforce just because they can.î

Marcus Hurd, head of corporate solutions at Aon Consulting said:

Final salary pension scheme provision has become a thorn in the side of UK businesses with most changes being made in the favour of members in recent times. The result has been that pension provision has increasingly becoming unaffordable, especially in the current financial climate. This is the first piece of good news for employers with UK defined benefit pension schemes for years. The really surprising aspect is that this support is coming from Europe rather than the UK. The decision allows employers to be flexible around retirement provision, which is a good thing for maintaining their support towards the future of UK pension provision.