The removal of the default retirement age (DRA) means employers will face new issues over redundancies, staff motivation, reward and employee benefits, says Mercer.
Older, longer-serving employees remaining in the workforce longer will affect the flow of talent through the workforce and the availability of senior roles will be less frequent in the short to medium term.
Wage bills will also increase because older employees, who are typically paid more, remain in their post longer. While currently the wages of new hires and internal promotions can be funded by the predictable retirement of older and better paid employees, without a DRA, this source of funding will become uncertain and cost control will become more difficult as resources are stretched.
Changing demographics in the workforce could impact funding and liabilities in pension plans as well as drive changes in the design of both post- and pre-retirement benefits, including group life cover and health insurance and/or well-being plans and employers will need to address the impact of longer working lives on the funding and liabilities of pension plans and benefit arrangements says Chris Johnson, head of the human capital business at Mercer.