The Employment (Contractual Retirement Ages) Act 2025 marks a major shift in Irish employment law, bridging the gap between traditional retirement contracts and the State pension age. CPAS Pension Consultant STEPHEN LAWLESS explores how this landmark legislation impacts workforce planning, challenges employers to justify mandatory retirement, and creates critical knock-on effects for pension and group protection schemes.
The Employment (Contractual Retirement Ages) Act 2025 represents a significant shift in Irish employment law. Employment contracts typically include a mandatory retirement age of 65, which is below the state pension age of 66.
This can result in a mismatch for retirees, who may leave employment before qualifying for the State pension and rely on the Benefit Payment for 65-year-olds to bridge the resulting gap in income for their first year of retirement.
This Act seeks to fix that imbalance. It recognises a basic reality: if the State expects people to wait longer for their pension, employment structures should accommodate continued participation in the workforce up to that point.
Employees whose contracts require them to retire before reaching State pension age now have the right to challenge that requirement, provided they have:
– Completed their probationary period.
– Notified their employer in writing; and
– Give three months to one year notice before reaching their contractual retirement age (or, where a longer contractual notice period applies, up to a maximum of six months).
Once notification is given, retirement is no longer an automatic contractual trigger. Instead, an employer can only insist on retirement if it can be objectively and reasonably justified by a legitimate aim, and if enforcing retirement is both appropriate and necessary.
WHILE THE PRINCIPLE IS SIMPLE, THE PRACTICAL CONSEQUENCES ARE NOT.
For individuals, this introduces a new level of decision making. With the fixed retirement age removed, or at least softened, remaining in employment until State pension age requires engagement, careful timing, and clear communication with their employers.
For employers, the period ahead of the Act’s commencement should be used proactively. This is an opportunity to review organisational readiness and put appropriate structures in place before the new obligations take effect.
Employers should use this time to ensure HR and management understand the legislative changes, potential penalties, and receive appropriate training.
Clear, consistent processes should be established for managing requests to work beyond retirement age, aligned with business objectives and supported by objectively justified, consistently applied decisions across comparable roles.
WHILE THE PRINCIPLE IS SIMPLE, THE PRACTICAL CONSEQUENCES ARE NOT.
For individuals, this introduces a new level of decision making. With the fixed retirement age removed, or at least softened, remaining in employment until State pension age requires engagement, careful timing, and clear communication with their employers.
For employers, the period ahead of the Act’s commencement should be used proactively. This is an opportunity to review organisational readiness and put appropriate structures in place before the new obligations take effect.
Employers should use this time to ensure HR and management understand the legislative changes, potential penalties, and receive appropriate training.
Clear, consistent processes should be established for managing requests to work beyond retirement age, aligned with business objectives and supported by objectively justified, consistently applied decisions across comparable roles.
THE KNOCK-ON EFFECTS FOR PENSIONS AND PROTECTION BENEFITS
The Act impacts pension and protection benefits by creating a structural misalignment as fixed retirement ages (typically 65) soften.
Key issues include:
– Pensions: “Life-styling” strategies may de-risk members too early, trapping them in lower-risk assets for too long.
– Group Risk: Death-in-service and income protection cover may cease or require costly renegotiation for those working past 65.
Without updating scheme rules, extended employment creates critical gaps in protection. Employees must realise that continuing to work does not automatically guarantee continued pension and insurance coverage.
FINAL THOUGHTS
The Employment (Contractual Retirement Ages) Act 2025 represents a change of how retirement is managed by employers and employees alike. By addressing the disconnect between contractual retirement ages and the State pension age, it gives employees greater ability to leave the workforce on their own terms, reducing the likelihood of having to rely on the Benefit Payment for 65 Year Olds.
As retirement becomes less of a single event and more of a transition, greater engagement, clearer planning and stronger alignment across employment practices, pensions and protection arrangements will be essential to ensure the system functions as intended.
CPAS: HERE TO HELP YOU NAVIGATE YOUR WAY
The CPAS team are qualified Pension Consultants. We specialise in helping professionals in the construction sector and related industries. Our team can work with you to review your pension plans and ensure you are retirement-ready.
CPAS provides the administration support for the construction sector’s dedicated pension schemes and is registered to provide the core administration services to the Trustees of the Construction Workers Pension Scheme (CWPS) , the Construction Executive Retirement Savings (CERS), and provides additional financial support services through Milestone Advisory DAC.
For more information, contact Stephen Lawless s.lawless@cpas.ie
