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Default retirement age scrapped

The Government is to press ahead with plans to end compulsory retirement at 65 despite calls from business for the move to be delayed.

Employment relations minister Ed Davey said the abolition of the default retirement age was "great news for older people, great news for business and great news for the economy". It will be phased in between April and October.

He dismissed warnings that allowing employees of pensionable age to stay in work would make it more difficult for young people to find jobs, insisting that the change will boost the economy and enlarge the size of the labour market.

The Institute of Directors has criticised the move - featured in both the Conservative and Liberal Democrat election manifestos - for reducing flexibility for employers.

Mr Davey said guidelines would make clear that employers will still be able to conduct performance appraisals and fairly dismiss staff found to be no longer capable of doing their jobs effectively.

He told BBC Radio 4's Today programme: "Many older people have skills and a huge contribution to make to businesses, and those businesses that have got rid of fixed retirement ages find it very beneficial. They have seen it boost their business, not have a negative effect."

Asked whether allowing older people to stay on in work would reduce the number of jobs available to younger workers, Mr Davey replied: "The opposite is the case. Because of this policy, the evidence suggests that there will be an increase in the number of workers in the workforce.

"That will boost the economy, increasing GDP, increasing tax revenue. Evidence internationally shows more people in the labour market means more activity, more income, more growth."

The announcement coincides with the publication of the Pensions Bill, which includes raising the state pension age to 66, as announced by Chancellor George Osborne in last October's spending review.

Michelle Mitchell, charity director for Age UK, said: "Today brings good news and bad news for older people: the phasing out of the default retirement age is good news for those that want to continue working past 65, but plans to increase the state pension age quicker than planned is bad news for the millions of older people, particularly the very poorest, who are unable to work for longer."

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