1. MANAGING WITHOUT THE DEFAULT RETIREMENT AGE A PANEL DISCUSSION James Davies, Sarah McIntyre, Hannah Price & Georgina Jones 15 June 2011

2. The Current Retirement Landscape (1) The Employment Equality (Repeal of Retirement Age Provisions) Regulations 2011 came into force on 6 April 2011 These Regulations  Remove the exceptions in the Equality Act 2010 which provide that it is not age discrimination to dismiss someone aged 65 and over if the reason is retirement  Remove “retirement” as a fair reason for dismissal in the Employment Rights Act 1996

3. The Current Retirement Landscape (2) The retirement procedure (and the duty to consider requests to stay on) have been deleted from the legislation. It is therefore age discrimination to dismiss someone at age 65 or over, unless this can be objectively justified

4. What are the options for employers? Remove retirement age Dismissal of those aged over 65 for one of 5 fair reasons Maintain retirement age at 65 or higher Will have to justify compulsory retirement age

5. Demographics

10. Default Retirement Age Lewis Silkin – June 2011 Sarah McIntyre Employee Relations Manager

11.  9.3 billion annual turnover  640 million annual profit  76,000 employees in 41 territories worldwide  21 million customers visit our UK stores each week  Founding member of the Employers Forum for Age  Sit on the Employer’s Forum for Age Steering Group  Have won awards and commendations for our age diversity  Younger worker focus as well – 1 st high street retailer to remove the U18 pay rate  Oldest employee 83 years old  Longest service 49 years Marks and Spencer - Overview

12. 12  Motivation: –Feedback from stores that they were losing good people –Feedback from individuals that they didn’t want to leave M&S –Embrace a workforce that reflects our customer base –Organisational fit –Drove positive external image  Considerations and Challenges: –Strong policies and processes –Preparation key –Legal considerations –Training for line managers –Future risk? Abolishing the DRA

13.  Introduced following A-Day – Changes to Pension reform (06/04/06)  Organisational fit  Popular with employees  Business benefits  Since 2006 number of employees aged 65+ more than doubled from 804 – 1656  2009/10 - 85% of employees who ‘retired’ did so flexibly Flexible Retirement

14. Older employees at M&S...  Employee Loyalty: –11% 20 years plus –5% 25 years plus  Your Say Survey Results 2011: –Over 65’s 82% happy with the training they receive VS Company average of 76% –Employees with 25 years service 100% satisfied –Over 55’s 85% positive they’d still be working for M&S in 12 months time VS Company average of 77% –Over 65’s 96% positive they’d recommend our products VS Company average of 93% –Over 65’s 76% positive they’d recommend M&S as a place to work VS Company average of 70%

15. Workplace Discussions (1)

16. Workplace Discussions (2) “Whatever the age of an employee, discussing their future aims and aspirations can help you identify their training and development needs and provide an opportunity for you to discuss your future work requirements and how these impact on the employee... They are a good way of raising the issue of retirement with older employees.” ACAS – Working without the default retirement age

17. Workplace Discussions (3) ACAS – suggested structure: Performance to date against targets, activites and outcomes Development or training needs Future plans (employer) Aims and aspirations (employee) Future performance

18. Workplace Discussions (4) Cannot hold employees to what is said as part of the discussion Flexible working opportunities in the lead up to retirement? Legal consequences  Discrimination claims  Inferences

19. www.sackers.com © Sacker & Partners LLP 2011 Lewis Silkin Managing without the default retirement age 15 June 2011 Georgina Jones

20. © Sacker & Partners LLP 2011 Managing without the DRA Pensions Issues Normal retirement age (NRA) What benefits to offer post NRA? Flexible retirement Retirement processes

21. © Sacker & Partners LLP 2011 DRA – Normal retirement age (NRA) NRA? Looks like this can be retained But need to offer benefits if people carry on working

22. © Sacker & Partners LLP 2011 Should NRA be changed? NRA Will not change automatically Increases will require consultation (60 days) Different for different types of workers? Cannot change for past service without consent

23. © Sacker & Partners LLP 2011 Benefits after NRA (1) Continue DB for DB members Continue DC for DC members Other options? If potentially discriminatory, can you objectively justify? Beware of age discrimination! Starting point, future benefits same as past

24. © Sacker & Partners LLP 2011 Benefits after NRA (2) Member choice? Members could opt out and defer benefits Member choice? Members who opt out could re-join the scheme on terms offered to current new members

25. © Sacker & Partners LLP 2011 Flexible Retirement – from what age? Objective justification? e.g. if way of retaining experience, or managing transition in parts of the workforce ? Potential age discrimination issues. Should be offered to all at minimum pension age (55) unless can objectively justify a different age

26. © Sacker & Partners LLP 2011 Flexible retirement – what would you offer? Take pension (all or part?) and continue working Option to re-join for future? (could just be DC) Risk benefits? (Treat as active or pensioner member? Make choices clear) Benefits

27. © Sacker & Partners LLP 2011 Group insurance benefits Very specific Covers benefits provided by employers to employees Only applies to insured benefits (not self insured) Exemption

28. © Sacker & Partners LLP 2011 Pension schemes left out in the cold?

29. © Sacker & Partners LLP 2011 Pensions – new focus for workforce management?

30. Performance management

31. Sumner Redstone - 88 Working past 65 Lord Philips - 73 Warren Buffett - 80 Prince Philip - 90 Stephen Hawking - 69 Kenneth Clarke - 70 Tom Jones - 71 The Queen - 85 Helen Mirren - 65 Alex Ferguson - 69

32. How will employees respond?  Retire anyway?  Work a bit later and then retire?  Work until feel should stop?  Work until chat with employer?  Aim for pay off?  Work beyond and wait to be sacked?

33. Implications for employers  Be able to plan  Avoid pay offs  Be able to deal with underperformance  Help employees who want to retire  Adjustments for disability

34. What employers should do  Obtain information  Consistent, honest and prompt performance management  Consistent approaches to training and development  Adequate pensions  Flexible working programmes  Manager training  Avoid inferences

36. Insured Benefits NEW EXCEPTION It is not age discrimination to only provide access to “insurance or a related financial service” to employees, aged under 65 (or state pension age if greater).

37. Insured Benefits Does not cover self-insured benefits What about those over 65 who already get these benefits? Will it deter employees from providing benefits to over 65s? If you do provide benefits to the over 65s, will you be able to justify stopping the benefits later on?

38. Enhanced redundancy schemes Will reducing redundancy payments close to retirement still be lawful?  cases on windfall payments > Kraft Foods v Hastie > Ormerod v Cummins Engine Company Limited > Loxley v BAE Systems Land Systems (Munitions & Ordnance Ltd.)

39. Share schemes Approved & qualifying schemes – minimal impact Unapproved & EMI schemes Consider “good leaver” provisions Defining “retirement”:  Age?  Length of service?  Future plans?

40. Thank you