The default retirement age of 65 will be phased out this year, meaning that employers will no longer be able to force workers to retire at that age.
The Employment Relations Minister Ed Davey said that it would still be possible for employers to force people to retire if they were no longer up to the job.
He also claimed that the increased flexibility for older people to stay in the jobs market would boost the labour market overall and would not hurt the chances of young people getting jobs.
Employers are still able under the Employment Rights Act 1996 to fairly dismiss someone if theygo though the proper processes, and one of the reasons you can dismiss someone fairly includes capability.
Between 6 April and 1 October, only those people who were told before 6 April, and who are due to retire before 1 October, can be compulsorily retired using DRA.
The decision was hailed by trade unions, but the Institute of Directors has criticised the move, claiming that it will reduce flexibility for employers.
Ditching the DRA was first proposed by the coalition government in July last year - largely to tackle issues around the ageing population and the shortfall in pension savings - and featured in both parties' manifestos.
Individual employers will still be able to operate a compulsory retirement age "provided that they can objectively justify it" and last month, the CBI warned that firms faced "huge uncertainty" and a greater risk of unfair dismissal claims unless there was more legal clarity over the plans.
The CBI said that it was inevitable that people would want to work for longer. "However, in certain jobs, especially physically demanding ones, working beyond 65 is not going to be possible for everyone," said CBI's deputy director general John Cridland.
Companies are also to be required to automatically enrol their staff in pension schemes, a move expected to force employers to reduce their contributions for existing members.
Pensions expert David Robertson, of the Association of Consulting Actuaries, said: "A lot of big firms are looking at levelling down their contributions because they are looking at paying contributions for a lot more employees."