How to discuss flexible retirement options

Flexible practices can be a win-win for individuals and employers if handled carefully

Canada Life Assurance recently reported that the proportion of UK employees who will work past 65 is now at an all-time high. Traditionally, older workers (and all their accumulated skills and experience) have dropped off a cliff at the point of retirement. However, for strong commercial reasons, employers are increasingly seeking to harness the shifting demographics of the UK's workforce. Companies such as Aviva, Boots and Barclays have already pledged to increase their older staff by 12 per cent within five years, but Andy Briggs, the government's business champion for older workers, has called on employers to do more and employ an additional one million older workers by 2022.

The benefits

One option available to employers to assist in retaining older workers is 'flexible retirement'. Practices such as these may prove to be particularly important to organisations if Brexit produces a talent drain from the UK economy. Flexible retirement can offer an employee who is 55 or over the opportunity to apply to put all or part of their pension benefits into payment while reducing the number of hours or grade of their employment.

Arrangements of this type are often subject to the consent of the employer and/or the pension provider. However, at a time when many employers are closing final salary pension schemes, they may provide some employees with the opportunity to spend more time away from work but continue to enjoy financial security. And the additional flexibilities now available through changes to the tax regime for pensions mean some people can draw down on their pension pots in a flexible way instead of having to buy annuities.

According to a survey conducted by Ashridge, baby boomers (those born before 1966) are keen to embrace flexible retirement practices, with many of those surveyed seeking to plan a smooth route into retirement and adopt flexible working to improve their work/life balance.

Another survey highlights how one in five people in the 50-64 age bracket have caring responsibilities, with many of these individuals finding it hard to juggle these responsibilities with the demands of full-time work. Flexible retirement may give older workers the opportunity to successfully manage both commitments, which, in turn, may have positive effects on worker loyalty and retention.

Research also suggests that the wellbeing of those who have control over the timing of their retirement is generally better than those who do not. Work absences and the costs of training new staff are likely to be reduced, and experienced and competent staff retained for longer. PwC has estimated that if the UK increased its levels of workers over 50 to match that of Sweden, its GDP could be boosted by around 4.2 per cent.

Handling discussions

The commercial benefits of flexible retirement seem clear – but how do employers discuss retirement plans with an employee in a non-age discriminatory manner? Acas suggests these steps:

  • Discuss future aspirations and aims with all employees, whatever their age.
  • Ask open questions about the future plans of employees for the short, medium and long term.
  • Do not ask outright whether the employee is planning to retire in the near future.
  • Record discussions, keeping them as long as there is a business need to do so – but remember you cannot hold employees to what they have said until an agreement is reached or they formally notify you.

If properly conducted, discussions can help to facilitate the transition from work to retirement for both parties. The employee may be able to get the flexibility they need to continue working, while the employer retains their knowledge and experience. However, beware the dangers of not respecting the retirement wishes of employees. A company accountant recently won an age discrimination claim after being forced to retire, and was awarded £182,000.

Nerys Cobner-Vale is a solicitor in the employment team and Adrian Lamb a legal director in the pensions team at Blake Morgan