The Government announced today (July 29th) that it is planning to scrap the default retirement age in the UK from October 2011 and is launching a consultation process about their plans.

What they are proposing is that employers would not be allowed to dismiss staff simply because they had reached the age of 65. This formed part of the government's Coalition Agreement, and was included in both parties' manifestos, but previously no deadline had been set.

Currently, employers may force an employee to retire at the age of 65 regardless of whether or not the employee wishes to retire and without any form of compensation.  Employers simply have to hold a meeting with the employee during their last year of employment but at least 6 months before their retirement date.  Then, if the employee wishes to work on beyond this age the employer only has to “consider” this (if it is in writing) and may decline without giving a reason.

The Government has launched the start of a consultation process about scrapping the rule.

If this goes ahead as planned its effects may be felt as early as next April.

The CBI has criticised the speed of the proposed changes saying it left firms "with many unresolved problems" and added that government's timetable to scrap the default retirement age would give companies little time to prepare.

However Rachel Krys of the Employers Forum on Age was delighted and the charity Age UK, which has led the campaign to end the default retirement age, welcomed the Government's plan.

On the other hand David Yeandle of the Engineering Employers Federation: "It will make it more difficult for workforce planning”. Some employers are worried it will complicate the job of managing a workforce and add to overall costs.

The Government hopes the change will encourage people to work for longer, against a background of an ageing population and believe that this could ease the strain on public finances as more people continue to pay tax, while at the same time claiming the state pension. Activists have argued it could inject billions of pounds extra into the economy.