Plans to allow people to work until they are 70 are being drawn up by ministers in order to comply with new European Union rules.
Ministers are preparing to enforce an EU employment directive which would give full employment rights to people who want to continue to work beyond the age of 65.
Patricia Hewitt, the Trade and Industry Secretary, is currently considering plans to raise the age of retirement, and has not ruled out proposals to abolish a compulsory retirement age all together.
A cabinet committee will discuss how to implement the EU employment directive, which will prevent companies from imposing compulsory retirement ages on employees. The directive is due to come into force by October 2006.
The changes to the law are expected to be welcomed by many older people, who have complained that they have been pensioned off, even though they wanted to continue in their jobs after retirement age.
But trade union leaders have warned that raising the national age of retirement from 65 to 70 would mean that more than 20 per cent of people, and a third of men, would die before they began receiving their occupational pensions.
Under the changes people would continue to receive state pensions at age 65 and would have the option to retire earlier if they wish.
Last week Malcolm Wicks, the Pensions minister, said in an interview with People Management magazine, that a compulsory retirement age ought to be thrown into "the dustbin of social history".
But there are believed to be differing views within Whitehall ministries about when people should retire. Some ministers are opposed to the prospect of people continuing to work for the whole of their lives.Reuse content