15 April 2024
In response to the Department of Social Protection’s Pensions Commission Recommendations and Implementation Plan of 2021, the Government committed to a range of pension reforms, including those relating to contractual mandatory retirement ages. The overall objective of the reforms is to allow an employee to continue in employment until they reach the state pension age.
The recently published General Scheme of the Employment (Restriction of Certain Mandatory Retirement Ages) Bill 2024 (the “General Scheme”), creates a link for the first time between a contractual retirement age and the state pension age whereby a contractual retirement age may be amended by operation of the provisions of the General Scheme.
Aoife Newton and our Employment and Immigration Law team explain below.
The current pensionable age is defined in the Social Welfare Consolidation Act 2005, as being age 66. Where the mandatory retirement age included in a contract of employment is below 66, that age may be substituted with either the pensionable age (66), or an age the employee consents to retire at, which is later than the contractual retirement age, but before the pensionable age.
The employee must provide notification that they do not consent to the mandatory retirement age as set out in their contract. If this notification is not provided, the employer may take it as though the employee consents to retire at the mandatory retirement age. This is provided for in Head 3 of the General Scheme which reflects the objective of allowing, but not compelling, an employee to stay in employment until the pensionable age.
Should the employee refuse to consent to the mandatory retirement age included in their contract, they must provide notice of this refusal to consent to the employer. This notice must be provided not less than three months prior to the date on which the employee would have been required to retire under the contractual clause.
However, the employer may specify an alternative notice period which may be less than three months but cannot exceed six months. The employee may withdraw their notification that they refuse to consent to the mandatory retirement age set out in their contract of employment, on the giving of the notice period stipulated in their contract of employment or as set out in the Minimum Notice and Terms of Employment Act 1973.
The General Scheme includes certain exemptions to these measures. The proposed legislation is not intended to impact a retirement age included in any existing Act or statutory instrument that contains a prescribed mandatory retirement age. An example of this exemption relates to those working in the military service where there is an essential restriction on the retirement age, as recognised in the Employment Equality Act 1998 (the “EE Act”).
The proposed legislation shall also not interfere with any pension scheme, nor the equality legislation which allows for a retirement age to be expressly set where it can be objectively and reasonably justified by a legitimate aim, and where the means of achieving that aim are appropriate and necessary.
The Unfair Dismissals Act 1977 (the “UD Act”) will be amended to apply to employees who are forced to retire at an age which is below the state pension age without their consent.
Where an employee is dismissed before they reach the state pension age after giving notification of their refusal to consent to the contractual retirement age, the employee may take a case seeking redress under either the UD Act or the EE Act (but not both).
Effectively this legislation is to try bridge the gap between contractual retirement ages and the state pension age ensuring employees have a choice not to be left without an income between the end of their employment and the beginning of their state pension. The legislation will have no practical effect for employers who set their contractual mandatory retirement age at or higher than the state pension age of 66, as employees will be able to access their state pension on retirement.
Although only at general scheme stage, employers can start preparing for the drafting of the Bill and ultimate enactment of this legislation.
We, at KPMG Law, will continue to monitor developments of this matter. Our Employment Law Team, led by Aoife Newton, can advise on all aspects of employment contracts and the best approach employers should take in anticipation of these changes to the operation of retirement policies in Ireland. Please contact a member of the team for more information.
