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updated 1/13/2011 3:21:03 PM ET 2011-01-13T20:21:03

British employers will no longer be allowed to force people to retire at 65 years old, unless they can justify the dismissal.

The UK government announcement on Thursday aims to lessen pension payouts as Britons live longer. Although welcomed by many, employers raised concerns it will require them to provide benefits such as health or life insurance to workers over 65.

Employment relations minister Ed Davey described the decision as "great news for older people, great news for business and great news for the economy."

"Retirement should be a matter of choice rather than compulsion," he said. Previously, employers could compel workers to retire at 65 regardless of performance.

Most firms do not impose a fixed retirement age and there are around 850,000 workers aged over 65 in the U.K. There has been no evidence that productivity declines after that age, Davey said.

The government added that individual employers — such as those hiring police officers and air traffic controllers — will still be able to operate a compulsory retirement age "provided that they can objectively justify it."

The new policy will become effective on Oct. 1. The government also said it will raise the eligibility age for state pensions to 66, effective in 2020.

The news came days after a former television presenter won a case against the BBC for wrongful dismissal on the grounds of ageism — setting a precedent that could change the U.K. broadcasting industry by making it harder to favor young female presenters over their older colleagues.

Miriam O'Reilly, 53, complained to the employment tribunal that she was warned about her "wrinkles" and asked if it was "time for Botox" by her employers. She said she was not given a reason for her dismissal, and only told that the show needed to be "refreshed" as it moved to a prime-time slot.

The BBC said Tuesday it accepted the tribunal's ruling, and it will set up new rules on fair selection procedures for presenters.

Copyright 2011 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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