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Retirement

We’ve put together a complete guide to retirement to help you understand what it is you need to do, how you can support your employees, and an alternative to retirement.

If you need immediate support, get in touch with one of our experts here 0800 141 3592.

What is the retirement age in the UK?

In the UK, there isn’t a set age for retirement. Following a campaign by Age UK in 2011, the default retirement age of 65 was scrapped.

Although there are a few sectors that have a compulsory retirement age, such as the fire service, it’s important to note that this refers to how physically demanding the job is. hen individuals talk about the ‘retirement age’ they are usually referring to the state pension age.

When can you claim a state pension?

The state pension is provided to individuals by the government after they reach a certain age. The age at which they can claim the state pension changes depending on when an employee was born. When it was first introduced, it was 65 for men and 60 for women.

However, later years on, in 2010, this changed the government bringing the ages in line with each other and raised it to 66 for both men and women. It has then been changed to the following:

For employees born on or before 5th April 1970, when they reach state pension age it won’t change and they can claim it from their 66th birthday.

For individuals born between 6th April 1970 to 5th April 1978 the age is 67. It’s important to remember that this could change to 67 and a month, and 68, but it depends on their birth date. For anyone who was born after 6th April 1978, the age is 68.

Can employees take early retirement?

This can depend on the pension type your employee has, whether it’s a personal, state or workplace pension. Typically your employees will be able to draw on their personal and workplace pensions earlier than their state pensions. Although your employees should be aware that if they decide to retire early, for whatever reason, it will affect their state pension.

What we mean by this is, the earlier your employees take their retirement the less money they will accrue in their pension pot. Ultimately this will mean that the money they already have in their pots will have to be their future income for longer.

In the UK, most pension plans allow employees to claim their retirement at 55, although there are plans to change this to 57 in April 2025. In some cases an employee can claim their retirement funds before the age of 55, this is known as ill-health retirement.

Ill health retirement

Ill health retirement is a type of retirement your employees can take if they are no longer able to work or earn as a result of long-term sickness or disability.

Can you force employees to retire?

In short, no you can’t force your employees to retire. As an employer, you should be aware of the compulsory retirement age, which can be enforced if there is a justifiable reason to do so.

What is compulsory retirement?

Compulsory retirement age is when employers are allowed to tell their employees that they need to retire. Usually, this takes into account their health and safety.

But it’s important to remember that you need to give your employees a valid reason. For example, if your industry is a heavily physical sector such as construction, or if you operate in a sector that is regulated by law, such as the fire service.

How can I justify compulsory retirement?

To be able to justify the compulsory retirement age, you need to justify your reasons. This will help you to avoid unfair dismissal and age discrimination claims being put in against you. You should be able to answer the following questions:

  1. Do you have evidence to justify your reasoning? This could include any safety concerns you have and proof of these concerns.
  2. Is there a non-discriminatory way of achieving the same results? For example, could you change your employee’s job roles?

Do your employees need to inform you of their retirement plans?

In short, no, your employees don’t need to tell you if they are going through the retirement planning phase. If you have an employee who mentions in passing that they are considering retiring in the next few years you shouldn’t take this as a final decision or them handing their notice.

What is the retirement process?

If you work in a sector that has a compulsory retirement age, then there is a set process you should follow, we’ve outlined it for you below.

  • You are required to give your employees the correct notice of when their employment is coming to an end.
  • You should arrange with your employee a date from when their retirement will start. This is also where you should give your employees a justified reason for compulsory retirement.
  • You should listen to their requests about working past their retirement age.
  • If your employee doesn’t agree with your decision you should allow them to appeal the decision.

How can I support my employees

As an employer, there are a few things you can do to help support your employees, such as:

  • Giving your employees access to a financial advisor and counselling (You can do this through an EAP)
  • Arrange for them to reduce their working hours as they approach retirement date. (Employees should be reminded that this can affect their retirement income.

Can employees still receive a pension while they are working?

if one of your employees decides that they want to work past the state pension age, they can still receive their pension. It’s important to note that your employees must be of state pension age or have agreed on a different date with their pension provider. If your employees decide that they want to work past their pension age, it can affect their pensions.

State pension

If your employee decides to delay when they take their state pension it can mean they get higher weekly cash payments from their pension pot.

Private or workplace pension

If your employees are enrolled on a workplace pension scheme at work, lowering the number of hours they work can lower the amount of pension money they get. It’s important that you make this clear to your employees who are considering reducing their working hours.

Do employees need to pay national insurance if they are working past the state pension age?

If your employee decides to work past the state pension age, they shouldn’t pay national insurance. If you do have employees who choose to work past the age of 66, you should explain this to them. Your employees will also only have to pay their income tax but this is only if their total income is more than their tax-free allowance.

What happens if you treat employees unfairly?

If you try to force your employees into retirement without having a valid reason can lead to your employees putting in a discrimination or unfair dismissal claim against you. If the employment tribunal votes in favour of your employee you can be faced with large fines and a damaged reputation.

Are there any alternatives to retirement?

There are alternatives to retirement that your employees can embrace, we’ve put together four alternatives you can offer.

1. A new role

Is your employee retiring because they’re unhappy or tired of their role? If so, offering an alternative position may encourage them to stay. If you do choose this, make sure the new role is equivalent to their current one.  A significant pay cut or reduction in benefits isn’t likely to convince them to stay at work instead of retiring.

You don’t have to offer them a position similar to their current job. If they need training to switch, let them know that this will be the case and offer to support them with it. They may be looking for a new challenge in working life anyway, and you’re never too old to develop new skills.

2. Working from home

Flexible working isn’t just for millennials and Gen Z staff. In many cases, remote work is appealing to those of retirement age. It cuts down travel time and means workers can spend more time with their families.  Those who have dependents or other commitments will also appreciate this option.

Naturally, not every position will be viable for home working. You’ll need to assess whether each role can be done from home. If you do decide to allow remote work, you’ll need to conduct a homeworking risk assessment. You may also need to carry out training on new systems to make sure the employee is able to work from home efficiently. Homeworking doesn’t have to be full-time either. Consider flexible options where the individual spends some time in the workplace and the rest at their home office.

3. Reduced hours or part-time work

You could also consider shifting their hours of work. There are a number of alternatives you can implement:

  • Moving from full-time to part-time
  • Reducing overall hours of work
  • Implementing flexible start and finish times

Again, these options depend on the role itself. However, there aren’t many roles where you won’t be able to implement some degree of flexibility. Speak with the individual to see what will work for them—include them in the conversation. Are there certain days they would like to take off? Could they do it with a later start or an earlier finish?

4. Phased retirement

If you really can’t convince them to stay in the long term, you could make the most of their time in the workplace. Phased retirements offer quite a degree of flexibility. Typically, it means the individual reduces their hours of work, drawing from their pension pot while retaining a regular income. If this idea sounds like something you’d want to put into place, you should discuss how it will work with the employee.

There is no strict limit to how long a phased retirement will last. However, the policy cannot be enacted beyond the age of 75. This means you could hold on to your valuable employee for a couple of decades longer, albeit on reduced hours. You must agree on a phased-out retirement plan with the individual before you put it into action. Failing to do so could result in a tribunal claim.

By Matthew Reymes Cole, Croner