Pension savers will soon be able to work for longer after the Government announced plans to scrap the default retirement age by October 2011.

At the moment workers are forced to retire at the age of 65 regardless of whether they are fit enough to carry on working.

The new Government announced in its Emergency Budget last month that the default retirement age would be scrapped quickly. But today marks the start of a consultation on the process, with forced retirement due to be phased out from next April before becoming illegal on October 1st, 2011.

The news has been welcomed by many workers, who have been challenging the default retirement age, saying they would like to right to continue working if they’re able to do so. And for many it offers valuable extra years to top up their pension savings.

Ed Davey, the Employment Relations Minister, said: “With more and more people wanting to extend their working lives we should not stop them just because they have reached a particular age. We want to give individuals greater choice and are moving swiftly to end discrimination of this kind.

“Older workers bring with them a wealth of talent and experience as employees and entrepreneurs. They have a vital contribution to make to our economic recovery and long term prosperity.”

It will still be possible for individual employers to operate a compulsory retirement age, provided that they can objectively justify it.

But the news that the default age will be scrapped in just over a year has sparked criticism from some groups who claim that it will lead to younger people struggling to get jobs and more employment tribunals from those who will feel unfairly dismissed if retirement is forced upon them even at a later stage.

John Cridland, Deputy Director-General of the CBI, says it gives business’ little time to prepare for the new rules: “Scrapping the DRA will leave a vacuum, and raise a large number of complex legal and employment questions, which the Government has not yet addressed. This will create uncertainty among employers and staff, who do not know where they stand. There will need to be more than a code of practice to address these practical issues; we will need changes in the law to deal more effectively with difficult employment situations.

 “A default retirement age helps staff think about when it is right to retire, and also enables employers to plan more confidently for the future. In certain jobs, especially physically demanding ones, working beyond 65 is not going to be possible for everyone.”

In a separate reform the Government has also proposed to raise the state pension age to 66 as soon as 2016 in order to cut back on the cost of an ageing population.

Click here for pension quotes and advice »

© Fair Investment Company Ltd