For many, making plans for retirement is about looking forward to that free time, to play a bit of golf, learn a new language or spend time with your grandchildren. The need to plan your finances and how to start using that pension that you’ve been paying into for decades makes the timing important.
Retirement also means bringing your career to an end, often leaving a workplace that has given you many happy memories and friends over the years, therefore, planning the timing and way in which you retire has to be right for you.
When and how?
When and how to retire is broadly up to you. An employer may require written notice and may require longer notice than if you were leaving for any other reason so the first thing to do is to read your contract or company handbook and comply with the notice requirements. If these are silent, seek advice from HR about what they are expecting, or you can simply give the notice you are required to give under your contract of employment to terminate your employment.
Does this mean there is no age limit?
It used to be the case that there was a default retirement age which meant that employers could require their employees to retire when they reached the age of 65. However, this was abolished in 2011. The result is that in most circumstances, you can continue working beyond the age of 65 if you want to or need to.
Treating someone less favourably because of their age is unlawful, unless it can be objectively justified. This means that requiring someone to retire at a particular age is now normally unlawful.
In which circumstances might this be justified?
Where an employer can show that there is a real business need to have a fixed retirement age, it will not be unlawful for them to implement and apply it. Where there is an occupational requirement for a role to be performed by a younger person, this too may be lawful if applied reasonably and fairly.
There are many ways in which this legitimate aim may be justifiable but it must meet social and public policy objectives around employment, which might include having a balanced workforce or protecting the dignity of older employees by not requiring them to undergo capability and performance management procedures.
If an employer has a justifiable reason, in order to avoid any successful claim of age related discrimination, they must also apply it proportionately in the circumstances. This means considering alternatives, justifying why the specified age is appropriate and necessary, applying it consistently and ensuring that in so applying, it achieves the legitimate aim sought.
Importantly, it is not unlawful discrimination for employers to cease to offer benefits, such as life assurance, health insurance and medical insurance to employees at the point when they reach the greater of age 65 or state pension age.
If I work for longer, how does this affect my state pension?
The age at which you can claim from your state pension, if eligible, is changing and will be 66 years old for both men and women by 2020. When you reach that age, even if you are still working, you can decide whether to claim your state pension immediately or to defer payments.
If you work beyond state pension age, you are no longer required to pay national insurance on any earnings and so you should ask your employer to ensure that they do not make these deductions.
Why is all of this important?
Well for starters, a report published by the DWP in 2015 found that almost one third of employees surveyed did not know that they could work for as long as they wanted and a similar number were not aware that they had the right to request flexible working, despite only 17% stating that they would find working full time in the lead up to retirement as being preferable.
This suggests that planning for retirement begins years before you approach the age that you want to retire. The lifestyle considerations need to be factored in potentially many years earlier and in the case of the financial considerations, almost at the very start of your career given the recent mandatory law requiring every eligible employee to be automatically enrolled into a pension scheme.
Flexibility around your final few years of employment will benefit your employer too as in many cases, it means that you and many others in your situation may be able to work longer than they otherwise could or would have done.
How do I approach the topic at work?
ACAS suggests that it is good practice for employers to have discussions with their employees about their future aspirations at any age in order to have training and development needs and working requirements in order to facilitate succession planning and the management of that process. However, you don’t need to have these conversations if you don’t want to.
While this makes sense and benefits both an employer and an employee, it doesn’t give an employer licence to make demands of you about whether you plan to retire. This type of conversation could quite conceivably amount to age related harassment and discrimination, particularly if the conversation (or treatment following your response to that question) is met with hostile and intimidating behaviour in an attempt to make you retire on your employer’s terms.
This could be your last formal act in your career and so you will want to remain clear and professional in your communication. In most circumstances, your employer will handle the news sensitively and respectfully. You should notify your pension provider and make the necessary arrangements to start drawing down your entitlement, having checked that you have met the criteria to be eligible to do so.
The key is to remember that in most circumstances, you have control over when and how you retire and so ensure that you do this in a way and at a time that is right for you. Then just focus on enjoying that well deserved retirement!