The Government is to press ahead with plans to end compulsory retirement at 65.
It means employers will not be able to fire workers simply for being too old (see the State Pension Boosting guide).
The change will be phased in between April and October this year to allow firms to ready themselves and amend their human resources policies.
Age campaigners have long called for the abolition of the default retirement age, which fulfils a pledge in the Government's coalition agreement.
Employment relations minister Ed Davey says the abolition of the default retirement age is "great news for older people, great news for business and great news for the economy".
He dismisses warnings that allowing employees of pensionable age to stay in work would make it more difficult for young people to find jobs, insisting the change will boost the economy and enlarge the size of the labour market.
"Older workers have a lot to offer in the workplace and it's time we got rid of this outdated form of discrimination," says Davey.
"We will do all we can to support businesses with the change."
Rachel Krys, campaign director of Employers Forum on Age (EFA), says the move is a "pragmatic response to the increasing calls for change".
She says: "Growing numbers want to and have to work beyond 65. Outdated policies which prevent this group working increase the burden on the already creaking state pension provision and ignores the fact that we are living longer and healthier lives."
While less than a third of firms still insist on people leaving on their 65th birthday, there are concerns among business leaders about the change.
The Institute of Directors has criticised the move – featured in both the Conservative and Liberal Democrat election manifestos – for reducing flexibility for employers.
Davey says today guidelines would still allow employers to conduct performance appraisals and fairly dismiss staff found to be no longer capable of doing their jobs effectively.
Those in some manual jobs could therefore still be at risk of dismissal at 65.
There are already around 850,000 workers aged over 65 in the UK, and there is no evidence that productivity declines after that age, he adds.
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