Key Update on Retirement Age in Ireland

The Employment (Contractual Retirement Ages) Act 2025 comes into effect on 29 June 2026

The Employment (Contractual Retirement Ages) Act 2025 (the “2025 Act”) introduces a new employment right for employees whose contract of employment contains a mandatory retirement age which is below the State pension age, currently set at 66.

From the commencement date, employees will be entitled to notify their employer that they do not consent to retire at the contractual retirement age and wish to continue working.

The WRC revised its Code of Practice on Longer Working (the “Code of Practice”) following the introduction of the 2025 Act. The Code of Practice comes into effect on the same day as the 2025 Act.

Scope

The 2025 Act seeks to address a practical gap where employees find themselves contractually bound to retire before they are in a position to draw down their pension. As such, the scope of the legislation is quite narrow, with this new right only applying to those employees who find themselves subject to a contractual retirement age lower than 66.

For employers who do not have a contractual retirement age, or who align the contractual retirement age with the State pension age or above, the 2025 Act will have little impact.

Procedure

In order to avail of the right under the 2025 Act, an employee must write to their employer at least 3 months, but no more than a year, before they are due to retire. The employee must set out in writing that  they do not consent to retirement at the date set out in their contract and should quote the legal basis for this notification, in accordance with section 5(1) of the 2025 Act.

Employees will be able to avail of this right on or after 29 June 2026. Given the 3 month notification period, the earliest possible retirement date which could be impacted by the 2025 Act is a contractual retirement date of 29 September 2026.

Where an employee has notified their employer that they do not consent to retire at the retirement age set out in their contract, their employer cannot enforce the contractual retirement age unless it can be objectively and reasonably justified by a legitimate aim of the employer and the means of achieving that aim is appropriate and necessary. If an employer wishes to enforce their contractual retirement age, they must set out this justification, by way of written reply within 1 month of having received notification from the employee.

Where an employer accepts the notification submitted by the employee and agrees to the extension of their contract, provisions should be made in the contract of employment to reflect this arrangement and to outline the new retirement date.

Employers must not penalise an employee for proposing to or exercising their right not to consent to retire at the retirement age set out in their contract.

Objective Justification

Any compulsory contractual retirement age, whether set below or above State pension age, must be capable of objective and reasonable justification by reference to a legitimate aim, and supported by evidence that the retirement age is appropriate and necessary to achieve that aim. The Code of Practice provides illustrative examples of legitimate aims, including:

• intergenerational fairness
• the creation of a balanced age structure within the workforce
• health and safety considerations, and
• the protection of personal and professional dignity.

In applying the objective justification test, the Code of Practice distinguishes between employees who fall within the scope of the 2025 Act and employees aged 66 or over who seek to remain in employment. Where the 2025 Act applies, any decision to enforce retirement must be objectively and reasonably justified. In contrast, for employees aged 66 or over, objective justification arises in assessing whether the contractual retirement age applying to a class or category of employees can be lawfully justified under the Employment Equality Acts 1998-2021.

Working Beyond 66

The Code of Practice retains the pre existing procedure for employees aged 66 and over who wish to remain in employment. In these circumstances, there is no statutory right to remain in employment, rather, the employee may make a request to work longer. Such requests must be made in writing by the employee not less than three months before the intended retirement date and should be followed by a meeting between the employer and employee. The employer’s decision should be communicated to the employee as early as practicable following the meeting. Any decision must be made on fair and objective grounds. In deciding whether to grant or refuse the request, the employer should consider whether there are good grounds on which to accept or refuse the request, the objective criteria applicable to the request, the contractual framing of any arrangement for the employee to remain in employment and whether a flexible working arrangement might be more appropriate. Where a request is refused, the employer should clearly set out and explain the grounds for that decision.

Pensions and Employee Benefits

Trustees and employers should consider the impact of the 2025 Act on policies relating to age related benefits, including pension arrangements and insured benefits.

Trustees and employers should review whether a scheme’s governing provisions remain appropriate in light of the 2025 Act. In particular, the definition of “normal retirement age” (or any equivalent term) under an occupational pension scheme is often aligned with an employee’s contractual retirement age or fixed at age 65. Consideration should be given to whether this definition ought to be amended to accommodate situations where an employee remains in employment beyond that age.

If no such amendment is made, a scheme’s late retirement provisions will instead govern the treatment of benefits where an employee remains in employment after their contractual retirement age. Trustees and employers should ensure that these provisions remain suitable in light of the 2025 Act, particularly considering that retirement after contractual retirement age is likely to become a more common practice. In particular, the accrual of benefits and contribution payments beyond contractual retirement age should be given careful consideration.

Where necessary, amendments to scheme rules may be required to ensure that schemes operate effectively and in a manner consistent with evolving employment practices.

Employers will also need to consider how insured benefits will operate where an employee continues in employment beyond their contractual retirement age, including death in service cover and permanent health insurance. In doing so, regard will need to be had to any applicable age limits or constraints under the relevant insurance policies.

WRC Complaints and Remedies

Breaches of the 2025 Act or the connected Code of Practice can be referred to the WRC by citing a specific breach of subsection (3), (4) or (5) of section 5 or section 8 of the 2025 Act. An employee has six months from the date of the breach in order to make a complaint, extendable to 12 months where the failure to refer the complaint within the 6 month time limit was due to reasonable cause. The maximum compensation awardable under the Act is 2 years’ salary.

Offences

The 2025 Act creates a new criminal offence where an employer fails to provide a reasoned written response to an employee who has notified that they do not consent to retire at the contractual retirement age. This offence attracts the penalty of a class A fine (up to €5,000) or imprisonment for up to 12 months, or both.

Practical Implications for Employers

Employers should review contractual retirement age clauses and related policies in light of the notification regime introduced by the 2025 Act. In particular,  employers should be mindful of the obligation to objectively justify their retirement ages as enforcing retirement below 66 may constitute a breach of the 2025 Act.

Employers and trustees should take steps to review and, where necessary, update pension scheme rules and insured benefit structures to ensure they operate effectively where employees remain in employment beyond their contractual retirement age.

The legislative direction has been towards restricting the enforcement of contractual retirement ages, but questions remain as to whether further reforms will lead to their complete abolition and it is an area to watch.