Scrapping the “default retirement age” is another nail in the coffin of freedom of contract

Another nail was hammered in the coffin of freedom of contract today when the Government confirmed that it was scrapping what it calls the “default retirement age”. The “default retirement age” allowed employers and employees to freely agree a retirement age as long as that age was not below 65.

The idea that employers and employees should be allowed to sign contracts of employment with agreed retirement ages written into them is regarded by the coalition as a relic of the days when contracts of employment were free agreements between employers and employees. The late twentieth century saw contracts of employment being written by governments, with jobs having some kind of property right entitlement to those who are lucky enough to have them.

The concept of the freely-agreed retirement age has been undermined over the last few years and will now be scrapped. Once you have hired somebody, you are stuck with them for life unless you go through complex procedures of dismissal (by showing the employee is no longer capable) or redundancy. Any dismissal on grounds of incapability will be very vulnerable to tribunal challenge on grounds of age discrimination. Firms with large HR bureaucracies might be able to manage these processes – though at the expense of such bureaucracies becoming still larger and more powerful – but smaller firms, as ever, will bear a greater proportionate burden. It will be a nice earner for employment lawyers too.

Read the rest of the article on the ConservativeHome website.

Philip Booth is Senior Academic Fellow at the Institute of Economic Affairs. He is also Director of the Vinson Centre and Professor of Economics at the University of Buckingham and Professor of Finance, Public Policy and Ethics at St. Mary’s University, Twickenham. He also holds the position of (interim) Director of Catholic Mission at St. Mary’s having previously been Director of Research and Public Engagement and Dean of the Faculty of Education, Humanities and Social Sciences. From 2002-2016, Philip was Academic and Research Director (previously, Editorial and Programme Director) at the IEA. From 2002-2015 he was Professor of Insurance and Risk Management at Cass Business School. He is a Senior Research Fellow in the Centre for Federal Studies at the University of Kent and Adjunct Professor in the School of Law, University of Notre Dame, Australia. Previously, Philip Booth worked for the Bank of England as an adviser on financial stability issues and he was also Associate Dean of Cass Business School and held various other academic positions at City University. He has written widely, including a number of books, on investment, finance, social insurance and pensions as well as on the relationship between Catholic social teaching and economics. He is Deputy Editor of Economic Affairs. Philip is a Fellow of the Royal Statistical Society, a Fellow of the Institute of Actuaries and an honorary member of the Society of Actuaries of Poland. He has previously worked in the investment department of Axa Equity and Law and was been involved in a number of projects to help develop actuarial professions and actuarial, finance and investment professional teaching programmes in Central and Eastern Europe. Philip has a BA in Economics from the University of Durham and a PhD from City University.