Frettens Update: Impact of retirement changes on share schemes

  4th May 2011      
 Company News, Employment Law

The abolishing of the default retirement age of 65 is the potential necessity for employers to amend their employee share scheme rules as a result. This is because many such schemes refer to the default retirement age and classify an employee whose employment terminates by reason of retirement to be a ‘good leaver’ and therefore entitled to more valuable benefits than an employee classified as a ‘bad leaver’, the latter category usually encompassing dismissals and resignations. Depending upon the specific nature of the scheme, employers will therefore need to review the terms of their schemes. Particular amendments that need to be considered include:

  • Amending any references to specific retirement ages unless these are to be retained (on the basis that the employer feels it can justify a particular retirement age);
  • Reviewing the definition of a ‘good leaver’ and a ‘bad leaver’ to consider how older workers dismissed on capability grounds can avoid losing benefits by being treated as bad leavers. Employers may also wish to ensure that voluntary retirements are included within the definition of ‘good leaver’.
    Employers should not delay in reviewing such schemes as any changes may require approval from shareholders and Her Majesty’s Revenue and Customs.


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