In the workplace, your employees will inevitably retire at some point in their careers.
This is often a difficult decision, especially as they might be earning their peak income. So, stepping away from the role could affect their financial situation.
Whether you’re ready to see your employees leave or not, you have a duty of care to support them and follow the correct process for retirement. If not, you could face age discrimination claims or large compensation fees.
In this guide, we’ll explain what retirement is, when an employee can retire and what process you should follow as an employer.
What is Retirement?
Retirement is when an employee chooses to stop working. This is usually done when employees reach a certain age and decide to enjoy life without the pressure of work.
There are many factors for employees to consider before retiring from work, such as:
- The physical or mental ability to work.
- Healthcare cover.
- Financial situation.
- Job satisfaction.
What is the Retirement Age?
Under the Equality Act 2010, there is no legal retirement age. You can no longer force your employees to retire at a certain age. Failure to do this may lead to age discrimination claims from your employees.
Before the Equality Act 2010, the retirement age was 65 years old. This is usually the average age men retire in the UK. However, women usually retire at 64 years old on average.
Employees are allowed to work beyond the age of 66 if they want or need to. But there may be some exceptions where you can ask your employee to retire.
You can ask them to retire from their job if it involves a certain level of mental or physical ability.
You must follow a fair procedure and give the correct amount of notice if you feel your employee needs to retire.
If an employee wants to claim their retirement pension, they may have to wait until they are 66 years old.
As life expectancy continues to grow, so does the State Pension age. But employees don’t have to stop working when they reach this age.
However, a large number of people will have been enrolled on a private workplace pension. Employees may be invited to join the scheme when they start their employment.
You can enrol your employees into the workplace scheme if:
- They are not already in one.
- Aged between 22 and State Pension age.
- They earn more than £10,000 annually.
- They work in the UK.
You should be aware, that employees are allowed to opt-out at any time if they want to.
Are There Different Types of Retirement?
Transitioning into retirement is never easy, but there are ways you can support your employee in this process.
When your employee is looking to retire, outline a general plan for the future of their employment.
There are a few types of retirement you can present them with:
Early retirement can be an attractive option for some employees. Employees may decide to retire early for several reasons including ill-health, redundancy, or the pressure of work.
If your employee is looking to retire earlier than usual, check the workplace retirement scheme to see what benefits they’re able to claim.
Phased or flexible retirement
An employee’s work could be phased out over a certain period, without giving up on work straight away.
If your workplace scheme permits, your employee may be able to draw part of their pension first, increasing the amount later on.
Medical retirement is when an employee can access their pension early due to poor health.
In private or workplace pension, an employee may be able to take an income from their pension at any age due to their ill-health.
If an employee’s life expectancy is less than one year, they may be able to claim all of their pension as a tax-free lump sum.
If you want to keep your employee on board, these options can help you with retirement planning. They will give you and your employee more time if needed.
You may also need help with an ongoing project, or you would like them to train a replacement for the role they are retiring from.
Get Expert Retirement Advice With BrightHR
As your employees get to the end of their careers, you need to ensure you’re supporting them.
Losing a valued member of your team can be hard, but you need to ensure you follow the correct process. Failing to do this or forcing your employee out could lead to discrimination and unfair dismissal claims.
Manage your retirement process with the BrightAdvice employment law helpline. If you need any support on the laws of retirement, don’t hesitate to get in touch.
Book in a free demo today or give us a call on 0800 783 2806
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