Ireland: Contractual Retirement Age
The rules around retirement are changing, placing new pressures on employers.
New legislation is changing how contractual retirement ages operate in practice, increasing employee choice and placing greater emphasis on justification, process and consistency.
We highlight what the new framework means for employers, including managing retirement decisions, responding to requests to work longer and addressing pensions and benefits implications.
What Is a Contractual Retirement Age?
A contractual (or “mandatory”) retirement age is an – express or implied – term requiring an employee to retire at a specified age. Such a term may arise from:
- the employee’s contract of employment;
- long‑standing custom and practice; or
- the normal retirement date under an occupational pension scheme or company policy.
Contractual Retirement Ages and Discrimination
Irish law allows contractual retirement ages, provided they are objectively justified.
The Supreme Court has confirmed that a mandatory retirement age will not amount to unlawful age discrimination where it:
- pursues a legitimate aim;
- is appropriate to achieve that aim; and
- goes no further than necessary.
This mirrors Employment Equality legislation and places the focus squarely on the employer’s justification. Employers should therefore be able to clearly answer a key question: what is the legitimate business reason for having a contractual retirement age?
The WRC Code of Practice on Longer Working identifies examples of legitimate aims, including succession planning, intergenerational fairness and maintaining a balanced age profile. While not legally binding, the Code is highly persuasive and should be followed in practice.
Practical Steps for Employers
To support a lawful contractual retirement age, employers should:
- maintain a clear retirement policy explaining the business justification for the retirement age;
- ensure the retirement age is an appropriate and proportionate way of achieving that justification;
- review and approve the continued justification for the retirement age at board level on a regular basis; and
- put in place procedures to support employees approaching retirement and to manage requests for longer working.
What Changes Under the New Act?
The Act significantly restricts an employer’s ability to enforce a contractual retirement age below the pensionable age of 66 without the employee’s consent.
Where an employee does not agree to retire at the contractual retirement age, the employer may not retire them before either the age the employee consents to or the pensionable age (whichever is earlier), unless the retirement can be objectively and reasonably justified. Employees are also protected from penalisation for refusing to consent to retirement.
The Act applies to employment contracts that specify a retirement age below 66. It does not introduce a default retirement age and does not require employees to retire at the pensionable age.
Employees who do not consent to retire must notify their employer at least three months in advance (or up to six months where the contract allows). If the employer nevertheless seeks to enforce retirement, it must issue a reasoned written response within one month, setting out the objective justification.
Employees may bring a complaint to the WRC where retirement is imposed below pensionable age without consent. Remedies include reinstatement, re‑engagement or compensation of up to two years’ remuneration (or €40,000, if higher). Failure to issue a reasoned response is a criminal offence and may expose the employer, and in some cases senior officers, to fines or imprisonment.
Pensions and Benefits Considerations
Allowing employees to work beyond retirement age raises important pensions and insurance issues.
Many Irish pension schemes have a normal retirement age of 65, after which pension accrual and insured benefits often cease. While the Pensions Act allows different benefit ages where objectively justified, this can be difficult to establish, and many employers therefore permit continued defined contribution accrual beyond retirement age, subject to Revenue limits and scheme changes.
Where further accrual is not allowed, employers must ensure access to alternative savings arrangements, including Personal Retirement Savings Account and, for employees under 66, the state auto‑enrolment scheme (My Future Fund).
Insured benefits do not automatically extend beyond age 65, so policy terms should be reviewed with insurers. Where employees work beyond retirement under a new arrangement, pension and insured benefit entitlements should be clearly documented, particularly where benefits reduce or cease.
Practical Guidance for Employers
While the Act does not abolish contractual retirement ages, it significantly changes how they operate in practice. Employers should review retirement policies, decision‑making processes and pension arrangements now to ensure they are ready when the Act comes into force.
To support a lawful contractual retirement age, employers should:
- maintain a clear retirement policy explaining the business justification for the retirement age;
- ensure the retirement age is an appropriate and proportionate way of achieving that justification;
- review and approve the continued justification for the retirement age at board level on a regular basis; and
- put in place procedures to support employees approaching retirement and to manage requests for longer working.
This is a high-level general update only. Legal advice should be obtained on specific circumstances.