As demographic trends shift, the topic of retirement is on the agenda for many employers. Retirement is also a key policy consideration for the government most notably with the signing into law of the Employment (Contractual Retirement Ages) Act 2025 (the “Act”) in December 2025. The Act allows, but does not compel, an employee to stay in employment until they reach the “pensionable age” (defined as 66 years). The Act requires a commencement order before it comes into operation.
This article considers (i) the legal framework on retirement in Ireland before and after the passing of the Act; (ii) recommendations for employers in practice; and (iii) pension and insured benefits considerations for employers and employees working beyond retirement.
Let’s recap…
A contractual (often referred to as “mandatory”) retirement age is an express term in an employee’s contract of employment, although such a term may also be implied into the contract. A retirement age may exist in a business through custom and practice over many years and generally arises from the pension draw down date in the relevant occupational pension scheme. It may also be incorporated into a contract through contractual company policies.
1. Is a contractual retirement age discriminatory?
Recent Supreme Court case law confirmed that: “provided that the aim [for the contractual retirement age] sought is legitimate and the means of achieving that aim are “appropriate and necessary” (proportionate), a mandatory retirement rule does not offend the prohibition on age discrimination.”
This reasoning supports Ireland’s Employment Equality legislation which confirms that a contractual retirement age does not constitute age discrimination where:
- It is objectively and reasonably justified by a legitimate aim;
- the means of achieving that aim are appropriate; and
- it goes no further than is necessary.
Accordingly an employer must be able to answer this basic but important question when imposing a contractual retirement age – “What is our objective business need (legitimate aim) for having a contractual retirement age?”
The non-binding WRC Code of Practice on Longer Working (the “Code”) lists some non-exhaustive examples of what constitutes a “legitimate aim”, including: intergenerational fairness; succession planning; and creating a balanced age structure in the workforce. This Code is highly persuasive in defending age discrimination claims and accordingly we strongly recommend adherence to its guiding principles.
2. What practical steps should employers take to achieve compliance?
- have a robust retirement policy demonstrating that the mandatory retirement age is objectively and reasonably justified by a legitimate business aim;
- be able to demonstrate that the mandatory retirement age is an appropriate and necessary means of achieving that legitimate aim;
- be able to demonstrate that the mandatory retirement age remains justified and approved at Board level on an annual basis; and
- provide a mechanism / procedure to assist employees in preparing for retirement and to deal with requests for longer working
3. How to manage a request to work beyond a contractual retirement age?
The Code provides guidance to employers on best practice in managing the engagement with employees in the run up to retirement age including the following steps:
- Within 6 to 12 months of an employee’s contractual retirement date, employers should notify the employee in writing of the company’s intention to retire them on the said date, followed by an in person meeting to discuss the approaching retirement including a handover and any transitional arrangements in regard to the particular post. The employee should be given assistance including guidance and information regarding their retirement.
- Where the employee wishes to work beyond the contractual retirement date, the employee should make such a request in writing no less than 3 months before the intended retirement date. This should also be followed up with an in person meeting.
- The employer should give due consideration to such a request and ensure that any decision made is on fair and objective grounds, and handled consistently.
- A decision, setting out the grounds for the decision, should be communicated in person to the employee and followed up in writing as early as practical, offering a right to appeal.
- The employee may be accompanied by a work colleague (or a union representative, if relevant) to the meeting to consider their request to work beyond the retirement age and at any appeal hearing.
- Additional questions relevant to the role and business needs should be explored by the parties.
Change in store…
The Act essentially prohibits the mandatory retirement of employees under the pensionable age (which is currently 66) where the employee does not consent. If an employee does not consent to the mandatory retirement age, the employer must not retire the employee before (i) a date to which they do consent to retire or (ii) before they reach the pensionable age, whichever is the earlier, unless it is objectively and reasonably justified by a legitimate aim and the means of achieving that aim are appropriate and necessary. The employee is also protected under the Act from penalisation, or threat of penalisation, by the employer for proposing to or exercising their right to not consent. The Act applies to contracts of employment containing a specified age (below the pensionable age of 66) at which an employee is obliged to retire.
4. What are the main changes?
- Notice: Employees must serve notice on their employer at least three months (unless a greater notice period is provided for in their contract up to a maximum of 6 months) (but not more than one year) before they reach the mandatory retirement age set out in their employment contract if they do not consent to retire at that date.
- Reasoned reply: An employer must provide an employee with a reasoned written reply within one month if it opts to enforce a mandatory retirement age despite receiving the above notification from an employee. Such a reply must set out the objective justification and how the mandatory retirement age is appropriate and necessary. Failure to do so is a criminal offence (see below).
- “Allow, not compel”: The rules will only come into effect where an employee does not consent to retire at the contractual retirement age. In those circumstances, that age will be read as though the age referred to is the earlier of the date at which the employee consents to retire or the pensionable age.
- Not a “de facto” retirement age: The change will not “enforce” retirement at the pensionable age. Employees over the pensionable age, will still be entitled to bring a complaint under the Employment Equality legislation if forced to retire. It is important to note, however, that in circumstances of non-compliance, the Act provides that relief cannot be granted under both the Act itself and the Employment Equality legislation.
- Relief under the Act: Employees will be able to refer a complaint of a breach of the Act to the WRC if their employer imposes a mandatory retirement age which is lower than the pensionable age without their consent. The WRC may award re-instatement, re-engagement and/or an award of compensation of up to two years’ remuneration (or €40,000, whichever is greater).
- Offences under the Act: The Act includes another offence, namely, failure to provide a reasoned reply as set out above. Such an offence can attract the penalty on summary conviction of a Class A fine or a term of imprisonment not exceeding 12 months or both.
- Personal liability for directors, managers, secretaries or other officers: Any such person who is found to have consented or connived to the above offence, may be found, as well as the employer, to be guilty of the offence and liable to prosecution on summary conviction as above. It shall however be a defence for such persons to prove they exercised due diligence and took reasonable precautions to ensure the Act was complied with.
5. What are the pensions and benefits considerations for those working beyond retirement?
Where employees continue working beyond the contractual retirement age, employers should consider the implications for the pensions and related insured benefits provided to those employees. Key points here are:
- Many pension schemes in Ireland provide for a normal retirement age of 65, and accrual of further pension benefits, as well as entitlements to insured benefits such as death in service or permanent health insurance, typically cease at this age.
- The Pensions Act 1990 as amended (the “Pensions Act”), similar to the Employment Equality Acts, prohibits discrimination on a number of protected grounds in the context of pensions and insured benefit provision. While age is one such protected ground, the Pensions Act contains a number of important carve outs. In particular, it provides that it does not constitute a breach of the principle of equal pensions treatment to fix different ages as a condition for the level of contributions or benefit accrual an employee receives. However, doing so must be appropriate and necessary by reference to a legitimate objective of the employer.
- As above, a legitimate objective justifying a reduction or removal of further pension benefits could prove difficult to demonstrate. Increasingly, many employers will, therefore, accommodate employees wishing to continue to accrue certain benefits (in particular defined contribution benefits) past normal retirement date. This approach may require amendments to an employer’s pension scheme, and it should be noted that certain Revenue rules on accrual of additional benefits will need to be adhered to and advice should be taken on this. Where an employer is not allowing further accrual past normal retirement age:
- they must ensure impacted employees will have access to a Personal Retirement Savings Account as an alternative retirement savings vehicle; and
- where an employee is under age 66, they would also have the right to opt-into the state auto-enrolment system (My Future Fund). If the employee exercises that right, contributions would be payable to My Future Fund until the employee reaches age 66.
- In relation to insured benefits, often underlying policy documentation will provide that such benefits will cease at age 65. Where employers are allowing employees to work past that age, and intend for such benefits to continue, they will need to discuss this with their insurer to determine whether this can be facilitated and consider any premium cost implications.
- Where a new contract (typically fixed term) is to be put in place for an employee who is permitted to work beyond the normal or mandatory retirement age, what their pension and insured benefits will be after they reach this age should be clearly documented. In particular, if insured benefits will cease to be provided it is recommended that this is made clear.
Contact Us
For more information please contact a any member of our Employment, Pensions and Benefits Group or your usual contact at Matheson.