Ian Chapman-Curry: Hello and welcome to this Gowling WLG "All About Age" webinar. This time we're asking whether it is a happy 10th birthday for the UK age discrimination regime and considering some of the trends that have emerged over the past decade, but we won't just be looking backwards we'll look into the crystal ball to see what, if any, impact Brexit would have on age discrimination and consider what longer working life means for employers and pension saving.
Today's presentation will last for approximately 40 minutes with plenty of time for your questions at the end but before we get started just some housekeeping points. The webinar player has a few simple controls, the most important are volume adjustment and full screen option which are at the bottom right-hand side of the player. There are also some tabs along the top which you click on to access details of today's presenters, the slides and our recent alerts on age discrimination.
You can also ask us questions at any time, we really encourage you to do that, just click on the "ask a question tab", type in your question and click submit and we will try to answer as many as we can in the time available. There is also a "poll" tab, don't worry too much about that now. Throughout the webinar polls will automatically flash up on your screen and we would really encourage you to participate in those. If for any reason you can't see the current slide just click on the "slide" tab to get back to it.
Today we have Richard Lee and Sean Lane. They are lawyers here at Gowling WLG and are both members of our Combined Human Recourses Solutions team. They have extensive experience of advising on HR, employment and discrimination law and pensions, so it's over to them.
Richard Lee: Thanks very much Ian and welcome all, welcome back to some of you to our latest "All About Age" webinar. So we are going to take you back in time first of all, ten years, just to see what things looked like back then when this was introduced and then we are going to go forwards to the present day with some case update from Sean.
So prior to 2006 no express prohibition on age discrimination, although employers were allowed to legitimately retire people for mandatory reasons and indeed they did so, usually to manage the changing needs of the business. 2006, ten years ago already, the first time it was made unlawful for employers to directly or indirectly discriminate on the grounds of age. These provisions were brought in off the back of the EU's Equal Treatment Framework Directive which will link in nicely to the later section of this webinar on Brexit and how we think age would or wouldn't look if we moved outside the EU. Now it's probably the first time the Spice Girls have been quoted on a webinar but many of you will remember "Two become One". When the age regulations were brought in, five became six so five fair reasons for dismissal became six and it was legitimate to mandatorily retire individuals under the Unfair Dismissal legislation.
So just looking at where the current age discrimination provisions sit since the 2010 Equality Act replaced the original 2006 Age Regulations, and we have them there on the screen for you. For those who like the legal references, for the lawyers amongst you, we have set them out and in the important blue box on the right-hand side age discrimination can be objectively justified, that is both direct and indirect. It is important to note as we move through this talk and I am sure many of you are aware of the differences between those two.
So the exemptions within the Equality Act, it's not an absolute and there are some important exemptions which employers work with. For example, hidden away back in schedule 9 for those of you who want to rummage around in the back of the Equality Act, there are exemptions that deal with length of service so you can provide benefits up to five years' length of service and with a complete exemption and above five years' service you as an employer would need to show that there is a reasonable business need.
Another exemption sits around statutory redundancy structures, in particular age multipliers so under 22, between 22 and 41 and above 41. Clearly age based structure but the government is comfortable that that doesn't offend the European provisions. Of course pension exemptions apply to almost everything. Pensions are entirely age discriminatory in the UK but the exemptions would cover joining ages, redundancy terms, different contribution rates, early retirement, late retirement, all of those age discriminatory elements are covered.
Then we are just stepping forwards to 2011 the abolition of the default retirement age, of course employers can still keep retirement ages but would need to justify those. 2012. An important year in many ways, London Olympics, but also the introduction of age discrimination provision in relation to goods and services, in particular in the workplace around insured benefits and we will come on to look at some of the cases that have been covered more recently in tribunals. There are some important exemptions that of course apply in that arena.
And then June 2014, flexible working regime extended across the workforce so all employees with at least 26 weeks' continuous employment can make a request to work flexibly for any reason and there has been a certain expansion of what are known as sandwich carers.
So those were the legislative developments so far, fascinating I'm sure you'll agree. We're now just moving on to the case law, now you might be thinking come on Richard I'm not going to listen to you talk through all of these cases in great detail and you're absolutely right, there is a plethora, I do quite like that word, and just so you are aware, the tribunal statistics, there were about 3000 age cases in the first year or so after the regulations were introduced. Peaked up to about 6000 in 2010/2011 before the default retirement age went and then it has dropped away significantly since then, along with other claims off the back of the tribunal fees being introduced.
So we've listed here some of the key cases in chronological order, some of which I am going to come onto in a little bit more detail and some of which I'll just briefly mention. There are a combination of MacCulloch for example about redundancy benefits; Seldon about compulsory retirement; Woodcock another one on redundancy benefits; Lockwood again on the balance of costs and objective justification and Harrod is a more recent case around compulsory retirement in the police force. Finally Smith and Gartner is a PHI case, income protection case about ceasing benefits at a certain age which I will come on to talk a bit more about.
So those are the UK cases and traditionally it's been more challenging for UK employers to meet the proportionality test of objective justification, they are able to identify legitimate aims, whether that be intergenerational fairness or maintaining a contented workforce, but the proportionality element has been much more of a challenge for employers in UK courts.
In the EU cases and we've just put a couple up on the slides for you Petersen and Georgiev. So Petersen was about a dentist and the compulsory retirement for dentists in Germany, the requirement is to retire at 68 and the European Court said that in the interests of maintaining financial security of the system controlling the number of dentists, never a bad thing I would guess, and also giving younger dentists an opportunity to come through into the health service was a legitimate approach.
Georgiev a similar compulsory retirement for university lecturers in Bulgaria, we're crossing the jurisdictions, and again the court found that it was acceptable in terms of junior promotion of younger professors and maintaining the quality of teaching. Also 68 which was the compulsory retirement age was five years higher than the state pension age in Bulgaria and a common reference in some of these EU cases is to the link with retirement benefits and in particular state pension benefits which the European Court seems to quite like.
Finally, is it now hitting the bottom line? Well surprisingly the awards in tribunals are not as high in age cases, the highest award around £30,000 and average around £11,000 so, to date, not huge awards against employers.
So just a little bit more on some of the cases and how they have developed. In the early days too old, too young, some very unsubtle stuff by employers. Very early on the case of an individual 18 year old dismissed and was told you are too young for the job, a substantial award was made for them. And another case, Northern Ireland at the opposite end of the spectrum a lot of youthful enthusiasm was used in adverts focussing on drive and motivation, the tribunal felt that a 58 year old with over 30 years' relevant experience had simply not been considered in a correct way. The tribunal said that the use of the term in particular "youthful enthusiasm" alongside all the evidence indicated basic direct discrimination and the employer failed to produce evidence to defend that position. So hopefully those types of claims in the early days have fallen away although Sean is going to come on to talk about one of the latest claims which unfortunately seem to be a bit of a regression.
Redundancy programmes, I briefly mentioned these so a couple of cases McCullough and ICI. Structured redundancy programme outside the statutory minimum which I mentioned before, so a redundancy benefit based on length of service and age, an individual brought the claim based on the fact that they were disproportionately discriminated against in terms of the compensation they were given on redundancy.
The employment tribunal found that the legitimate aims had been established ensuring the company had a viable business, a contested workforce and in particular important was that the programme had been agreed with the workforce, there had been proposals to change it but the particular structure had been agreed with the workforce. Unfortunately the employer failed on proportionality so it was sent back to tribunal but when reconsidered by the tribunal the employer was ultimately successful. So again legitimate aim seems to be established but a bit more difficult on proportionality.
Another case Loxley and BAE Systems just talking about the way in which redundancy payments are tapered towards age 60, this programme resulted in a complete cut off of benefits at 60 with the employer arguing that there would have been a windfall for those who were entitled to take their pensions at that age. Again, the employment appeal tribunal sent it back to the tribunal and asked them to reconsider the elements of proportionality.
Next we have, and it's not grappling with orange juice, it's objective justification so the key lines are the aims and proportionalities we have talked about The case of Woodcock is a leading case in the public sector, a chief executive was dismissed for reasons of redundancy just before a key age which would have given him a very substantial early retirement benefit. Ultimately the arguments focussed on whether cost alone could be justification and if it is still good law to say that you have to have more than simply costs in your arguments for objective justification. Retirement cases I have mentioned Petersen and Georgiev, the European Court tends to focus on the interaction with retirement benefits and pensions in particular and also the legitimate aim of intergenerational fairness.
And finally, insured benefits. There have been a number of cases in the tribunal. The claims focus on the unavailability of insurance benefits, so cases such as Purple Parking, the employer dismissed individuals who were not able to be insured as drivers and subsequently found out that the employer had actually requested that certain age groups were removed from the insurance. Oasis Taxis, again an insurance case of drivers and the employer had not shopped around enough to try and find insurance which met the age requirements.
And the last couple, Whigham and Capita, a PHI case, an individual who ceased to receive benefits at 55 and was successful in claiming against the employer for the termination of the PHI benefits. But a much more recent case of EAT Smith & Gardner last year, an individual whose benefits ceased at 60, those were the terms of the PHI and the individual's claim against the employer failed because the tribunal basically said that that provision was part of the insurance providers terms and the employer had not therefore discriminated against the individual. So those types of claims are moving between employer and provider.
And finally on this bit for those of you who work within this realm, I am sure there are many of you out there, we have all of these very useful references and guides: the Equality and Human Rights Commission's Code and Guidance, the Equality Acts and finally the ACAS guides. So I would recommend that you look at those, they are excellent resources and have been very recently updated. The Statutory Code of Practice from the Equality and Human Rights Commission (EHRC) was recently updated in April 2016.
Ian: Thanks for that Richard, there have certainly been plenty of interesting things coming through the tribunal in the past 10 years.
We have now got our first poll, it's over to ask the audience and on your screen you should now be seeing a very quick poll just asking whether any of you, your organisations or your employers retain any form of the normal retirement age. So if you want to just click on that. We are getting our responses in. I have plenty of responses. I am just going to give you a quick moment because those are still tumbling in as we speak. This is a very proactive are very click happy, audience which is good. I think we will leave it there, we have had well over half of you putting a poll response to that so thank you for that.
We are going to push those results out to you now. You can see that the overwhelming majority of you, 82% of the respondents from today's webinar, do not have any form of normal retirement age but interestingly there is a substantial minority, 20% though almost that do. Quite interesting isn't it Richard?
Richard: It is actually, that's kind of more or less how I would have expected it although the 80%/20% is a little bit higher so I would be interested in other comments coming in on people's experience of retaining contractual retirement ages and whether they've been challenged on those.
Ian: Yes and just a reminder that if you have any questions you are able to ask those all the way through the webinar and we will be looking at those at the end so it's a great chance for you to get some answers to your questions there. We are now just going to go over to Sean who is going to be providing us with a bit more detail on some of the cases that we have been flagging.
Sean Lane: Well thank you very much. As Ian said, I am now going to discuss two cases in particular, both are from 2015 so very recent and they serve as useful reminders about some established principles in age discrimination that are still proving to be issues for employers.
So the first case I am going to discuss is the case of Donka and Royal Bank of Scotland. In 2012 RBS underwent a restructuring exercise and, as part of that RBS decided that it was either going to redeploy staff or offer them voluntary redundancy. Four of the staff members were regional directors and two of these regional directors were under 50 whilst Mr Donka and another regional director were over 50 years of age.
The initial plan for RBS was to offer Mr Donka voluntary redundancy, however upon a calculation of Mr Donka's early severance package which included quite a substantial enhanced pension benefit, RBS realised that this package would come to around half a million pounds and had a swift change of heart and decided to instead of offer voluntary redundancy to Mr Donka they would redeploy him elsewhere in the business. The two younger directors, those regional directors who were under 50, they were offered and did indeed take voluntary redundancy.
Mr Donka then subsequently then brought a claim of age discrimination to the employment tribunal. So looking at the employment tribunal's (ET's) decision, the employment tribunal focussed their attention on the issue of comparatives. So just a very brief recap on age discrimination law, that in order for an employee to successfully bring a claim of age discrimination he or she must identify a suitable comparator in the business that is essentially a person that they can point to and say I have been treated differently to this person solely on the grounds of age.
But the employment tribunal said that the directors who were under 50, which is whom Mr Donka was using as comparators, were not suitable comparators because of their benefits package which was significantly less and the employment tribunal viewed that as offering a material difference and therefore were not suitable for Mr Donka to use as comparators. The tribunal also added that Mr Donka was not treated unfavourably even though he was treated differently and that the reason behind the difference in treatment was the cost of Mr Donka's severance package as opposed to Mr Donka's age.
The case was then heard in the employment appeals tribunal and the EAT disagreed with the position that the ET reached and they allowed the appeal and this is where the interesting and relevant issues for employers are raised. The EAT stated that the difference in the severance package was not enough to invalidate the two younger directors as comparators and also that Mr Donka's enhanced benefits package, even though it was different to the younger directors' entitlements, it was different because it was related solely to Mr Donka's age and therefore there was age discrimination.
It is of course worth remembering that age discrimination can be objectively justified in certain circumstances and this case was then routed back to the ET to consider the justification which I will mention again in a moment.
So we are looking at what the implications are from the EAT's decision now for employers and also just some suggestions of ways to avoid the pitfalls that arise from these kind of circumstances. So it is firstly worth remembering that the reason for treating employees differently when assessing whether there is age discrimination is irrelevant in terms of whether or not a claim of age discrimination can be brought. The issue is simply whether or not an employee has been treated differently or not and not why. The reason for the difference in treatment can become relevant and is relevant when you look at justifying the age discrimination but does not prevent a claim from being brought in the first place.
Secondly, the case as I've mentioned earlier was muted back to the ET to consider a defence or an objective justification from RBS of costs as a justification for the discriminatory treatment and that was heard in the London Central Tribunal this week on 17 May. However, it is important to stress that legal precedent means that costs are never enough to justify age discrimination in of itself, so an employer cannot take an action that is discriminatory as regards to age and simply justify that action because it would have been expensive to do otherwise.
So the key takeaway here is for employers to check their redundancy policies to ensure there are no discriminatory practices in place and also just give early thought to the cost of early retirement especially for senior staff because this can be significant and should be factored into any restructuring exercise at an early stage. The overall conclusion I think we can draw from this case is that making redundancy decisions by cost basis when cost is directly related to age, clearly runs the risk of a successful claim being brought.
The next case to discuss is the case of Dove and Brown & Newirth. The facts here are that Mr Dove was a long serving sales rep for Brown & Newirth which are a jewellery manufacturer. Mr Dove was the oldest member of the sales team by over ten years. The head of the sales team, who was significantly younger than Mr Dove, started to refer to Mr Dove as 'gramps' and he did this several times in both email and also in front of other staff verbally.
Mr Dove was dismissed in 2015 on the grounds of poor sales performance and the employer also drew upon the fact that there were complaints by customers that Mr Dove was "long in the tooth and too traditional in his approach to sales". Mr Dove subsequently brought a claim for age discrimination and unfair dismissal.
So what did the employment tribunal make of this? Well Mr Dove was successful in his age discrimination claim. The ET concluded that Brown & Newirth had crossed the line by referring to Mr Dove as 'gramps' and that the defence from the company that is was simply a term of endearment or, if nothing else, amounted to office banter, was certainly given short shrift by the ET who claimed that this was evidence that Brown & Newirth had effectively condoned ageism in the workplace by allowing this nickname to continue to be used. And interestingly the ET also decided that Brown & Newirth had been influenced by these customer comments which were clearly based on ageist stereotypes and that the company made no effort to discourage these remarks.
In terms of what to draw out of this particular case then, there are two important points for employers to consider. The first one, the more obvious one is that employers should be very wary of condoning or allowing workplace so called banter that could be potentially seen as discriminatory and the defence that this is a term of endearment or just workplace banter does not wash with tribunals.
The second point is a difficult one as regards to what attitude an employer should take in terms of customer attitude and employers might well understandably argue that it's not their job to educate customers and also that it cannot ignore significant customer complaints. And whilst this is no doubt a valid view point, the ET's criticism of Brown & Newirth here seems to be that there was just a passivity there on the part of the company to actively condemn these comments, so there was no effort by the company to even take the customer comments on board but then take the staff aside separately and stress the fact that these were based on ageist stereotypes and that they shouldn't be perpetuated in the workplace.
So what can employers do here to avoid these kind of issues and these difficult situations arising? And I think it's clear upon the facts that this is an issue around workplace culture and the first thing to ensure is that there is a robust equal opportunities policy in place for employers and their employees and also that employers are seen to be policing that policy and it is not merely just a gesture.
And then the second thing is that it has become clear that employers need to actively condone action against a culture that supports or encourages ageist stereotypes. The employer needs to be seen to be engaged with the employees in making sure that that kind of culture doesn't manifest itself. One obvious and simple way this could be achieved is to perhaps offer staff training and raise awareness of certainly when concepts such as office banter can cross the line into age discrimination.
So those were two recent cases there both from 2015 which raise some interesting issues that employers are still coming to terms with. That concludes the case law update.
Ian: Thanks for that Sean, those are both really interesting cases that just demonstrate that although we've had ten years of the age discrimination regime the underlying issue of discrimination on the basis of age certainly hasn't gone away and some really useful practical points there for employers.
That brings us on to the second of our audience participation points. This time we are just going to be asking you, thinking about those case laws updates, just how much you consider your organisation is age compliant. So I'm just going to send this poll through to you and you will see that there are four options for you to pick, not at all compliant, partially compliant, mainly compliant or, if you're feeling particularly positive about your organisation, totally compliant on age. We're thinking about this across the field, so on pay, benefits, opportunities and career.
So we have sent that over to you and we are getting the responses in now as people click for their options. Just give that a couple of seconds for those clicks to come through then we'll give you the updates on that. There are some really interesting points coming up on the cases Richard. I think it's clear that the tribunals are taking a pragmatic approach in some cases but not ignoring the underlying social policy which was to try and reduce discrimination on the basis of age in the workplace.
Richard: Yes absolutely. I was just going to flag up some questions that are coming in, some great questions, thanks very much, just keep sending them in. One question on how do you encourage employees to retire, seeing a growing trend of people wanting to be paid to retire. Yes, I'll come on to that in the last session actually.
Another one, retirement policy might be useful, would that policy be automatically discriminatory? I think my answer to that would be no, it wouldn't be automatically discriminatory but I am going to again come onto how you might want to deal with the workforce approaching retirement, whatever that means.
Are long service awards automatically discriminatory if more than five years, thinking of five, 15, and 25? As I mentioned, up to five you are exempt completely, above five years you have to show a reasonable business need so it is better to have evidence of why you are putting those structures in place at those ages, but you've done your survey and you can show the employees do appreciate the loyalty awards or that there is a valid business reason.
And finally just a quick one, pensions exemptions, someone wants a bit more on that. I did mention some but you can, for example, use admission ages, you can use early retirement, you can use late retirement, you can have a spouse's reduction for a younger spouse, you can apply different levels of contributions at different ages, so there are a whole rack of exemptions for pension schemes. Very few things not exempt, one that isn't is ceasing benefits at a particular age, that will require justification.
Ian: We are just going to push the results out. Thank you very much for participating. I'm going to flatter the audience just a little bit with these results and say it's very encouraging that we have mainly or totally compliant organisations, a lot of that will be down to some very proactive and capable HR management hopefully on the audience participating. But even for organisations where there is mainly compliance which is the bulk, the big blue two thirds of respondents that obviously feel there's some work to be done and perhaps some concerns over things like office banter and birthday cards, it's a very difficult thing to get to grips with.
So, we're just going to be going back to Richard now who is going to be having a look at some issues that will be coming up in the months and years to come.
Richard: So yes this is about Brexit, I mean frankly we're probably all a little bit Brexited out, I know I already am, it won't stop me voting but obviously not going to say which way, that wouldn't be right on this webinar.
So protection from discrimination and fundamental basic EU law as we know come across from the Framework Directive. Of course in the UK, race, sex and disability were all in primary legislation protected before the EU requirements came in and were implemented. I think what we would say is that Brexit would give whoever was in power some scope to review the position.
I think Mr Farage of UKIP was talking about potential retraction of race discrimination legislation in the 2015 election didn't go down that well. Potential I think the CBI about whether we need to review the lack of a cap for discrimination compensation in tribunals, so that might be another area for review and of course the Human Rights Act, I think a very, very hot topic. I think the Human Rights Bill was in the recent Queen's speech and will be out for consultation but within that there is a clear statement that it will be based on the principles of the European Convention so, Europe will not disappear and maybe somebody already knows the result of the Brexit.
So just moving on. Clearly age discrimination legislation comes straight out of the EU Equal Treatment Directive as you have already seen and that is the cornerstone of EU law but of course now the Equality Act 2010 is primary legislation so, even if the European Community is actually the EU legislation is removed, a government would still need to remove the Equality Act and I am not sure that any others would think that a government or employers would be lobbying hard to allow discrimination across the board.
So it seems unlikely that discrimination legislation and age discrimination legislation would disappear on a Brexit but one possibility, for example, is that a government might introduce the ability to allow positive discrimination as opposed to positive action. Positive discrimination on the grounds of age of course not being allowed under EU law.
European Court of Justice, or the Court of Justice of the European Union, may be one of those little name changes that annoys some people who don't like the EU but we have got to remember that as things stand, that court is the highest court and decisions are binding on UK courts so that is the current position and numerous cases have been referenced up to the European Court. Hayter v Hayday some of you will remember the Age Concern case, the challenge back in 2009 to the government's introduction of age legislation and in particular to the default retirement age or compulsory retirement. The courts clearly grappled with the European Directives and those provisions, ultimately leading to the removal of the default retirement age in 2011, but it was clear that if a member state wants to introduce justification for direct age discrimination then they must identify social policy needs or aims of a public interest nature.
2012 we had Seldon which I mentioned before, the retirement of a solicitor, yes of course it has to be solicitors going all the way up the courts off to the European court and Lady Hale of the Supreme Court talking about the difference between justifying direct and indirect discrimination. There clearly needs to be a difference which works with EU law, the social policy objective which the EU has made clear. So for direct discrimination claims it is now clear that there has to be a public interest nature and it has to be consistent with social policy aims of the state.
What if the default retirement age were brought back if we Brexited and was used by business to, shall we say, succession plan? But it is clearly against current government policy which I will cover and talk about longer working lives, so possibly unlikely to be reintroduced.
So, just talking about other impacts on the Brexit. Flexible working of course not directly from the EU or EU provisions but now as we have mentioned does apply to all workers, including those of any age and those with or without caring responsibilities. Working time very importantly and fundamentally linked to EU law, it would be interesting to see if any government would post-Brexit tweak those provisions in the light of business change, for example. And finally, provision of goods and services again not linked directly to EU provisions although there are on gender, for example, race but not for age. So again we are in a [unclear] position of will that change on a Brexit?
Just thought we would do a little bit on the countries that have got retirement provisions and age discrimination or legislation, even though they are outside full EU membership or EU membership at all, and there is the test for you, what are those countries - Norway, Switzerland, Canada and Australia.
What do they all have in common? Well yes they do actually all have state retirement ages and they all are moving up in the same way that the UK is moving up its state retirement ages, and they all have got age discrimination legislation protection. Canada's in particular, the Charter of Rights and Freedom, every individual is equal before and under the law the right to equal protection, equal benefit of the law without discrimination, in particular without discrimination based on race, national or ethnic origin, colour, religion, sex, age or mental or physical disability. And of course the US has itself had age legislation in place since the 1960s.
Finally a little bit on about what makes a Euro sceptic, there are the following factors apparently. A) so older voters, lower income and those who shop at a certain supermarket which I am not going to name and those who enjoy fishing, fascinating. More likely to vote to remain, younger voters, higher incomes, those who shop at another supermarket which I'm not going to name, drive luxury cars and go to the cinema a lot.
So we've got research from Sky News, the Guardian has done various research and it seems as though from a UGov pole reported by the Times that 43 is the age, the tipping age where you move towards a Brexit rather than a remain. It is also much more likely that older voters will come out to vote rather than younger voters.
Ian: Well I quite enjoy fishing and going to the cinema so I'm obviously torn between those but that does move us on to our final poll. I'm just aware that there has been so much interesting stuff that we are running beyond the 40 minutes that we were allocated but if you can stay with us that will be fantastic, if you do need to move off the entire presentation will be available online shortly afterwards and we will send you an email when that is available so you will be able to catch up on the rest.
So just turning to the third question and this is asking whether you or your organisation or employer allows any form of flexible retirement. There are four options there, to take full pension and stay in full time employment, to take partial pension and move to part time employment, full flexibility across employment and pension or no, not at all. So if you are able to just click on the responses to that that would be fantastic. We are getting our answers in. Do you want to have a look at some of the questions whilst we're waiting for the results of the final poll?
Richard: Yes, we have got a couple more comments about retirement policies, also cases of younger workers suffering in relation to the recent, well about a year or so ago, a recentish another tribunal case about the way in which two sisters were treated in their employment at a petrol station. So some of the very typical behaviour is still unfortunately going on and as Sean mentioned the key is training and intervention.
Ian: OK. I'll just send the results that we have got through to the audience. This one is a much more mixed bag so full flexibility sort of lying with not allowing any form of flexible retirement. It just shows that there is a real range of options from full flexibility being roughly a third, nothing whatsoever being roughly a third and then a third for a partial regime. It just shows that employers have taken really a variety of approaches, we've no judgement in that, we've no necessarily right or wrong answer to that but it's just interesting that there's still such a divergence. So back over to you Richard.
Richard: Thanks very much Ian and again, please do stay with us, probably another five or ten minutes and do keep firing your questions in.
So, just the final, home straits, running down that rapidly like Mo Farah. We're at future retirement so 2014 some of you probably will have been with us on our webinar since that document was launched, very good document still. It coincided with Ros Altmann then being launched as the business champion for older workers, obviously she has gone on to bigger and better things as Pensions Minister, but the policy is still there. This is about fulfilling working life and not ceasing at a particular point and George Osborne in December 2015 recently emphasised the government would like to see people spending about a third of their life actually in retirement which means that people will need to save properly.
So what's on the radar? We've got the abolition of the retirement age (2011). Decreasing pensions saving allowances, some of you will be aware of those, down from a high of 1.8 million coming down to a million this year. New pension flexibilities which I will come on to talk to you about. Next year we've got the lifetime individual savings accounts coming in for lifers and state pension age moving 66 in 2020, 67 in 2026/2028 and who knows beyond that 2030, 2040 if it's moving to 70 plus.
This line I find absolutely fascinating but that might just be me. It just shows the huge demographic change, I'm just going to pick out a couple. 2014 5.2 million 75 and over year olds, by 2039 you've' got 9.9 million. Look at the 85 year olds, 1.5 million at the moment to 3.6 million in 2039 and the old age dependency ratio down on the left is moving up from 3.10 to 3.70, so a huge shift in working population to retired population and reflecting that shift in the change in state pension age.
Pension flexibilities I have touched on so some of you will be aware that the DC, the defined contribution, money purchase pensions were changed over a year ago to now allow anyone from 55 to take their full pension pot as cash. Lots of headlines about buying all sorts of luxury goods expected as following Australia's practice that people will access their pensions sooner. There has been a rush in the first year but that has slowed and there will be more individuals on defined contribution savings. So moving away from defined benefit, final salary schemes into defined contributions.
And in particular that will lead to the issue which we are going to look at on the next slide. The difficulty for some employers where their workforce is a mixture of defined benefit and defined contribution and how they retain those workers. So it's very common now to have a lot of your workforce with caring responsibilities and whether they are for children or grandparents, George Osborne again possibly just stealing a little bit of Labour's policy on grandparents' leave and shared parental leave, supposed to be coming out in a consultation in May, there's still ten days left, they might do it. Potentially introducing grandparents and shared leave from 2018.
Pensions as retention tools or exit tools so final salary, defined benefit very generous generally speaking and a lot of the workforces that have those benefits will be waiting to retire to take those benefits. They are also used quite commonly as an exit tool for a generous early retirement package in some circumstances, so that can be a way of encouraging individuals to leave the workforce but of course they have to have a suitable level of benefits for that to work for them and the business.
Finally, defined contribution. Again money purchase, drawdown, taking benefits not all in one go, in slices, just make sure that the provider and you as the employer are making sure that that is done in a non-age discriminatory way.
Freedom of choice through budget changes. So we no longer the concept of retirement from employment, we can have pensioners who are in employment, we can have individuals who are still earning pensions and in employment and they are also employees. If you leave at 65 and continue to work for a competitor you can take your pension, have you really retired? If you leave at 55, take your pension and don't work for anyone else, have you retired?
These are questions now that are changing the whole meaning and concept of flexibility and the pensions flexibilities have simply added to the blurring of those lines between those who are in employment, those who are pensioners and those who are part-time workers and those who are flexibility retired. A retirement policy and education for the workforce is something that employers do need to think about.
So just quickly on allowances and restrictions on allowances. Reductions in the lifetime and annual I mentioned so lifetime coming down to a million, annual down to £40,000 a year and for those earning between £150,000 and £210,000 that reduces to £10,000 per year. That starts to impact on the way people save because they can no longer in some instances save for pensions, so that cuts across the government's automatic enrolment provisions encouraging more savings, more people are likely to opt out and there are exemptions now available to employers for employees with tax protections, they do not need to be auto-enrolled. So that then indicates a change in savings patterns to different forms of savings. Will individuals have to save for longer? It does look as though that is very much the case, just looking back at that demographic chart.
State pension age we've mentioned is moving up over the next couple of decades and finally the lifetime, the individual savings account, again, age based, you can put into it under 40, set it up when you're under 40, pay into it up to 50 and take the whole lot tax free when you're 60. You can contribute £3,000 a year and get £1,000 from the government and you can draw down about £450,000 for a house deposit payment. There is a lot of coverage at the moment about the effect on automatic-enrolment and pension savings in relation to the lifetime ISA and I recommend you keep a very close eye on that.
So nearly there, two more minutes. Possible scenarios for those still in employment, partial retirement and access benefits, maybe if they work full time and take a full pension, return to the workforce after the first retirement, this is in a sort of revolving door scenario, quite common in the United States because most pension savings are on the market so as they rise and fall individuals have to go back to work and they can leave work again. Much more likely now that individuals are going to have to save for longer because of that expectation. Their expectations have been raised, if they want a certain lifestyle they need to save for longer.
So finally, and thanks for listening until here. What can employers do to help? Be mindful of discrimination and the policies you put into place but again, the retirement policies, financial, education and retirement planning are really all coming through now, the question is who to offer them to?
You probably need to take a broad view of that because of the way in which retirement is changing, so it is probably better not to simply offer it to a certain age group, you can see and encourage people to take those courses and that type of planning over time. Do not give financial advice, that is regulated, there are criminal offences, as an employer I'm sure everybody out there is very keen to assist but don't step over a line into advice.
Then finally we are concentrating on good outcomes for employees, good savings outcomes whatever their age. Make sure that your processes and your communications are of course legally compliant, I'm going to say that, and consistent with the messages that are coming from your pension providers and of course at the moment we have Pensions Wise and we have guidance, we have risk warnings for individuals about not taking all their cash and we also have the problem of pension scams in the UK which are, unfortunately, still on-going but protections are being put in place.
So that's all I have for today. Thank you very much and thank you for your questions.
Ian: Yes, that's all been fascinating stuff and we've had a whole series of questions come through. If people are interested in just staying on for a few minutes we will be able to go through some of those. Richard has already had a look at some of the questions around offering automatic.
What about this one, this is interesting. You touched on loyalty awards in one of your answers to the questions, what about the right to take paid sabbaticals? There's quite a lot of organisations that after a certain amount of time you are able to take paid sabbaticals. John Lewis is a good example, it gives you a paid period of time after you have been with them for 20 years or so, it seems like a really nice perk to encourage loyalty but it will obviously favour people who have been with an organisation for a longer period of time.
Richard: Yes, that is a relatively common benefit that is offered, again, to avoid uncomfortable challenges I think the business just needs to have done its homework, asked the questions and look at the structure of sabbaticals and the record of people returning to the business because, in that sense, apart from loyalty, I think there is an element of retention so certainly comon,just need to look at the structure of it, don't pick arbitrary periods without looking at the background evidence behind it.
Ian: OK, you can have questions to any of the speakers here directly by email, get in touch, drop them a line and also if you are on social medial the hashtag #allaboutage will be picked up by our age guru with responses to that.
I'm just going to finish with one question Richard, what should we write in birthday cards?
Richard: What should we write in birthday cards? Happy Birthday.
And we should finally mention our Twitter hashtag, so please do go and look at that hashtag because we are very keen to hear from you.
Ian: We are and we are following anything that includes the hashtag #allaboutage. Have a think about that next time a birthday card comes around or someone approaches one of the milestone ages, what comments might be appropriate and please look out for our future age webinars. We are going to be hosting regular webinars on age as it continues to be a developing and fascinating subject.
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