Although certain terms can be implied into a contract, the employment appeal tribunal (EAT) has made clear in Royal and Sun Alliance Insurance Group v Payne (2005, IRLR 848) that contractual retirement ages are not necessarily governed by a pension scheme deed.

What were the basic facts?

When Mr Payne started work for Royal Insurance in 1974, its pension scheme allowed men to retire at 65. In October 1978, when the Royal said that men could retire between 62 and 65, Mr Payne opted for 65. In 1980, the trust deed reduced the retirement age, but only for men joining the company after 1 April 1978 to 62.

Then in 1995, following the decision of the European Court of Justice in Barber v Guardian Royal Exchange (1990, IRLR 240), the Royal equalised its pension scheme retirement age to 62 for men and women. It did not consult any of its staff.

When Mr Payne complained about the change, he was told that it was because of a "European Directive". The company did say, however, that individuals could retire later than that, but they had to give six months' written notice and they had to provide a strong business case.

In 1996, the Royal merged with the Sun Alliance. Their pension scheme allowed employees to retire between 60 and 65, although new employees had to retire at 62.

In March 2003, Mr Payne gave his manager a year's notice of his wish to carry on working after 62. He did not receive a decision until March 2004 (although the manager was supposed to respond within a month), when his request was denied.

His employment was terminated on 7 April 2004, the day before his 62nd birthday. Mr Payne brought claims for wrongful and unfair dismissal, arguing that his contractual retirement age was 65 and not 62. The tribunal agreed with him.

Was he wrongfully dismissed?

To prove wrongful dismissal, Mr Payne had to show the EAT that there was no implied term in his contract that his contractual retirement age would be governed by the terms of the pension scheme.

Following the law of contract, the EAT said that a "court will only imply a term if it is one which must necessarily have been intended by them [the parties]."

In this case, it pointed out that Mr Payne had objected to the variation to his retirement age, and that his pension deed had stated that the retirement age for someone in his situation would be the date agreed with their employer.

The EAT agreed with Mr Payne, and concluded that there was no such implied term in his contract. His employers could not, therefore, reduce his contractual retirement age to 62 by changing the provisions of the pension scheme, and were in breach of contract by terminating it when they did. Mr Payne had been wrongfully dismissed.

Was he unfairly dismissed?

To claim unfair dismissal, Mr Payne had to show, under section 109(1) of the Employment Rights Act that he had not reached the company's "normal retiring age".

Relying on Waite v Government Communications Headquarters (1983, IRLR 341), the EAT said this can be worked out by asking the employees in the "relevant group" what they understood to be the age at which they could be made to retire.

As people are not usually made to retire before reaching the contractual retirement age (in this case 65), Mr Payne could reasonably expect to continue working until he reached 65. That, therefore, was his normal retiring age, which meant that he could claim unfair dismissal.