Plans to scrap the UK’s mandatory retirement age at 65 risks “embittering the retirement process” and could lead to a costly surge of employment tribunal cases, according to the Confederation of British Industry (CBI).
Ministers are considering scrapping retirement at 65 as part of a package of proposals on age discrimination that are due to take effect in 2006.
In its submission to the government's consultation, the CBI argues that unfair discrimination based on age is unacceptable but says that the current retirement system enables individuals to retire with dignity rather than in conflict.
Under the new rules, the state pension will continue to be paid from 65. The CBI argues that this should be matched by a "normal" retirement age, with a review of retirement arrangements in five years.
In the absence of a normal retirement age, employers will have to assess whether an individual is capable of performing a job, which some employees may find uncomfortable. And the employers' body warned that this could lead to bitter employees seeking compensation under age discrimination rules.
Digby Jones, CBI Director-General, said: "Both employers and employees need flexibility to reach a consensus on retirement. Neither party should have to maintain an employment relationship longer than they want to. The world of work has changed and everyone needs choice.
"UK firms already have the third highest participation of older workers in the EU and removing the normal retirement age would go far beyond the retirement arrangements of many European countries."
The CBI said that while unfair discrimination based on age is unacceptable – such as specifying age ranges in job advertisements - some forms of discrimination based on age are necessary. Examples include international aviation agreements that prohibit pilots over the age of 60 entering foreign airspace and rules that bar those aged under 21 from driving heavy goods vehicles.
The introduction of age discrimination legislation in 2006 is widely expected to increase tribunal cases. Employment tribunals cost UK business £163 million each year and the CBI says that research from the USA shows that over 50 per cent of age discrimination claims there fail to produce any evidence of company wrongdoing.
"Age discrimination is more difficult to define than other forms of discrimination and the government must not fan the flames of the compensation culture with unclear or unworkable legislation," Digby Jones added.
"A surge of employment tribunal cases will cost companies dear, hit smaller firms especially and end up harming the employment prospects of the very people that need protection."