Employees have been given a greater degree of control over the decision as to whether they choose to work on for another year after their contractual retirement age.
For many workers currently approaching that decision, a new piece of recently introduced legislation means that they have greater clarity about their input into the decision around whether they retire at 65, as per their employment contract, or whether they stay on until 66 as per their current State pension age.
The Employment (Contractual Retirement Ages) Act 2025 was signed into law in mid-December, which might have flown under the radar during the busy Christmas period, and once commenced, will mark a significant shift in how employers manage retirement at work.
While the Act aims to support employees who wish to work beyond their contractual retirement age, it also introduces new legal and operational challenges for employers.
The legislation establishes a consent-based approach, allowing employees to decline retirement up to the State Pension Age, and places strict obligations on employers to respond.
In this Q&A interview, Joanne Hyde, partner at law firm Lewis Silkin, outlines some of the main practical changes that have been introduced by this new piece of employment legislation.
The Employment Contractual (Retirement Ages) Act 2025, signed into law on December 16, 2025, provides that employees can no longer be forced to retire at a contractual retirement age below the State pension age except in limited and objectively justified circumstances.
While the State pension age is currently 66, many employers operate contractual retirement ages of 65, or in some cases, lower. The new Act enables employees to decline to retire at their contractual retirement age and instead continue working up to the State pension age.
The Act does not compel an employee to remain in employment up to the State pension age if they do not wish to.
The new Act operates alongside the Employment Equality Acts, meaning that the existing rules on retirement ages continue to apply.
In practice, both the new Act and the Employment Equality Acts allow an employer to justify a lower retirement age, but only where the employer can show that the retirement age is objectively and reasonably justified by a legitimate aim and that the means of achieving that aim are appropriate and necessary. In the case of the new Act, this justification should be in respect of the individual employee.
Accordingly, the Act does not remove the ability to have a lower contractual retirement age, but it raises the threshold for employers seeking to enforce such provisions.
Under the 2025 Act, an employer may only refuse a request to work beyond a contractual retirement age where it can be objectively and reasonably justified by a legitimate aim, and where the means of achieving that aim are appropriate and necessary.
Where an employee notifies their employer that they wish to remain in employment, employers must provide a reasoned written reply setting out their justifications within one month. Failure to do so can result in criminal sanctions.
The courts have previously recognised a number of legitimate justifications for retirement ages, including health and safety, succession planning and intergenerational fairness. However, the 2025 Act specifically requires employers to justify a lower retirement age in relation to “the retirement of the employee concerned”. This suggests that the justification should apply to the individual employee, rather than the organisation in general. This represents a potential shift from existing law and appears to be at odds with a Supreme Court judgment in 2024 which found that individual assessment is not required.
While the Act has been signed into law, it has not become effective yet as it is awaiting the publication of a Code of Practice by the Workplace Relations Commission.
It is hoped that the WRC Code of Practice will provide guidance to employers on the implementation of the 2025 Act. In the meantime, employers should review their retirement policies and contractual retirement provisions in light of the new Act.
Given the potential for criminal sanctions, employers should also ensure that appropriate processes are in place to manage, record and respond to any requests from employees to remain in employment.
