Government in plan to delay retirement to 70

Ministers are pushing to raise the present retirement age of 65 up to 70 under proposals to be unveiled this week.

In a Green Paper published on Tuesday, the Secretary of State for Work and Pensions, Andrew Smith, will push for a more flexible end to working life to get the most out of an ageing workforce.

According to sources in his department, Mr Smith believes that people should no longer be forced to stop working at 65, regardless of their pension arrangements or their ability and readiness to work.

"He is keen to build in more choice," a source in the Department of Work and Pensions said. "There are issues about people wanting to save more or work longer or a combination of both." Mr Smith will, however, recognise that some workers want to take part-time early retirement.

The consultation document comes as ministers prepare to reject claims of a pensions crisis. Critics say the long-awaited Green Paper will not be radical enough to tackle head on the reported £27bn gap between what Britons are saving and what they need for retirement. They have urged a total overhaul of the system.

Instead the Government is understood to have concentrated on tax simplification and incentives to save within the existing pensions system. Proposals on tax changes will be included in an Inland Revenue document accompanying the Green Paper.

The Green Paper will also deal with the issue of compulsion on employers and staff to contribute to a pension scheme but is likely to shy away from forcing people to put money into company pension schemes. Instead it is likely to urge tighter controls on company schemes to safeguard people's savings.

While opponents of what former social services minister Frank Field has termed the "sticking plaster approach" are calling for bolder steps, the Government has been urged to avoid major surgery by big business. The Confederation of British Industry today calls on the Government to use the Green Paper as a first step towards a "simpler and cheaper" pension system. But director-general Digby Jones warns compulsory employer pension contributions could cost firms £29bn a year.

He said: "The Government must reshape the system. We need tax breaks that are big enough to make a difference, as well as radical simplification. But making employer contributions compulsory is not the answer. It would harm the people it is trying to help by affecting the viability of firms and threatening jobs."