Small businesses unprepared for retirement

Many UK small businesses said they are not prepared for the impending scrapping of the default retirement age whereas the workforce say they cannot afford to retire, reports show.

From the 1st of October 2011, the default retirement age (DRA) will be abolished, meaning businesses will no longer be able to force their staff to retire at age 65.

Employment Law Advisory Services (ELAS) head of employment law Peter Mooney says:

“It seems many businesses haven’t actually thought through how the new law will affect them in practice.”

A survey conducted by ELAS reveals that the majority of businesses are unprepared for the rising cost of private health insurance, as well as workplace adjustments for staff with disabilities.

“Expensive death-in-service benefits and healthcare benefits are just two examples of how employing older workers will affect businesses. Risk assessments, access requirements and adjustments for disability may also need revision as workforces grow older.”

Nevertheless, many workers are pleased with the impending plans as they feel they cannot afford to retire when they reach the default retirement age.

According to a report by actuaries firm LCP, this is largely because the decline of final salary pension schemes seems set to continue but it is expected that UK employers will save around £73bn as a result of steps taken to protect pensions from inflation.

According to LCP:

“Further downgrading of existing schemes is likely. In the short term, this may help the companies' finances.”