No one expects people to work into old age but the traditional concept that you retire at 65 is disappearing from the statute book in the near future.

In 2006, The Employment Equality (Age) legislation introduced a default retirement age (DRA) set at age 65. This made compulsory retirement by an employer below age 65 unlawful unless it can be objectively justified for business reasons.

It also made it possible for employees to request to continue working beyond 65 and for this to be properly considered by employers.

Four years later, the government has now confirmed its plans to remove the default retirement age completely, with the objective of encouraging people to work longer to help the economy grow.

According to a leading group risk insurer, over 60 per cent of employers already work without a compulsory retirement age. But what does this change mean for the other 40 per cent of employers and all of those that offer group employee benefits such as death in service?

The DRA will start to be phased out from 6 April this year and can no longer be used after 1 October 2011. After this, compulsory retirement by an employer could be treated as unfair dismissal and lead to a legal minefield.

Firms and businesses can retain a contractual retirement age through an Employer Justified Retirement Age (EJRA), which may be sought by some employees on the grounds of health or safety.

Group risk benefits have a termination age after which point cover is no longer provided for employees. With the removal of the DRA, there were concerns that the cost of the benefits would rise significantly and as a result be much reduced or removed altogether.

It has been estimated one in 12 people over 65 are now working and a third want to work beyond age 65.

The government’s response to the group risk issue was that it believes “it is in the wider interest that these benefits continue” to the age of 65 with the spread of risk concept aiding those who might have otherwise got cover on less favourable terms.

So it has decided to preserve the existing status quo and allow an insurance exemption to the new rules. Group risk benefits can be withdrawn after the age of age 65 initially and will rise in line with the planned changes in the State Pension Age.

So for businesses that currently run or are considering introducing income protection, life cover, accident or sickness cover and private medical insurance on a group basis, the cost will be contained somewhat by being able to set a termination age.

We await further details as to whether a termination age higher than the State Pension Age can be used for such benefits, as can be done now, to enable employers to cover those employees continuing to work if they want to.

Tom McPhail, Hargreaves Lansdown head of pensions research, believes that abandoning the DRA could have “a profound effect” on retirement planning.

He feels it will not only encourage employees to plan ahead but it could also radically change that attitude of employers to pension saving.

“The most effective way to ensure that someone retires is to make sure that they can afford to retire,” he says. “It will be in employers’ best interests not only to pay money into employees’ pensions but also to encourage employees to take an active interest in their retirement savings.

“This is a healthy alignment of interests and the government should be applauded for making it happen.”

One of the other recent major changes regarding age is the rise in the State pension age. For women, this started to rise from 60 to 65 from April 2010 and there has since been a new rule meaning that women’s state pension age will increase more quickly.

This will mean the 65 target will be reached in November 2018 rather than by April 2020 as originally planned. Then from December 2018, the state pension age for men and women will go up to 66 by April 2020.

As at mid-2009, according to the Office for National Statistics, there were more people of state pension age, 12 million, than there were under the age of 16 (11.5 million) and this has been a key driver in increasing the state pension age.

The impact of this includes people wanting or indeed needing to work longer until they are in receipt of the state pension income for their retirement.

This highlights an important need to review your retirement plans and keep your financial goals on track.

Trevor Law is a director with Montpelier Group (Europe), the privately-owned independent financial advisers located near Solihull . E-mail: tilaw@montpeliergroup.com