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Age-old problem

Ray Boulger
Ray Boulger

George Osborne announced in the emergency Budget that the Government would be consulting on abolishing a default retirement age, deferring the age at which the state pension becomes payable and also the timetable for equalising the age at which men and women are entitled to draw their state pension. It is clear things need to change for several reasons, including the fact that a default retirement age contravenes recent EU age discrimination legislation.

This is one EU law which is sensible and where the EU has taken the lead. Changing the law on retirement age is always going to be difficult politically but the mammoth UK budget deficit is a clear reason for accelerating changes. Notwithstanding this, it is important to address the fact that life expectancy has increased very significantly since 65 for men and 60 for women was selected as the default retirement age.

Engaging in a genuine consultation process is a very sensible initiative from the Government because the changes will have major ramifications in many other areas in addition to the most obvious ones. For example, most employee benefits cease at 65 or earlier. The AMI has just increased the age to which its death in service scheme covers its staff from 65 to 70 and found it made very little difference to the cost.

The impact on the cost of group private health insurance and private medical insurance schemes will probably be greater but will have to be addressed. These costs should, however, be mitigated by the fact that there will be a significant element of positive (for the insurers) selfselection in those working longer.

The mortgage market has gone back-wards in addressing this problem over the last three years, partly as a result of the credit crunch but also because of the FSA’s over-zealous attitude to what it calls lend-ing into retirement. Its approach, and that of most lenders, has been to assume that employed people will retire at 65.

This is arguably already illegal, even under current age discrimination laws, and needs addressing urgently. Already, many mortgage applicants under 50 as well as some already over this age are likely to stay in employment to at least 70 and it is not acceptable for the FSA or lenders to assume borrowers will retire at 65.

Ray Boulger is senior technical manager at John Charcol

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