I think elderly people (and probably all of us actually) should be retested regularly. My grandmother has finally given up her car aged 83, after driving for years with deteriorating eyesight, comprehension and reaction times. The final straw was when she crashed with my teenage cousins in the back. Prior to that there had been a string of accidents over many years.
My great uncle was finally persuaded to give up his car when I needed a new one and we were able to say he was actually helping me and my daughter out by selling it to me (I consulted both of his sons on the agreed price to make sure they felt it was fair, he kept trying to give me a discount 'for family' which I didn't want). He had already been diagnosed with dementia and had self imposed a ban on night driving, but hadn't been safe on the roads for over a year.
And my step grandmother, who hadn't driven a car since the mid 1960s, on the death of her husband suddenly announced that she would start driving the car again. she had limited mobility (eg struggled to walk from car to front door) so would never have been able to successfully complete and emergency stop, or look around the vehicle properly when manoeuvring, but mainly she had no idea how to drive any car, let alone modern ones. We contacted her GP and the DLVA but because she held a license there was literally nothing we could do. Eventually her friend persuaded her by saying she deserved people driving her around at her age, not having to do it herself, but we were genuinely terrified she would just get in the car one day and try. Car is now sold.
So many of us have stories like this and when you know an elderly relative isn't safe there is very little you can do.