THE prospect of working longer to avert a pensions crisis is looming large after ministers indicated yesterday that they will press ahead with plans to raise the age at which workers can claim the full state pension from 65 to 67.

Stephen Timms, the Minister of State for Pensions Reform, told delegates at a conference for pensions experts that work was “the best pensions policy”.

His comments came as it emerged that the Government’s Pensions Commission will recommend that the state pension age be raised to 67 from 65. Lord Turner of Ecchinswell, head of the commission, is believed to have concluded that workers should get a more generous state pension in return for delaying their retirement.

Mr Timms refused to confirm whether the Government will act on Lord Turner’s proposals. Tony Blair is believed to be in favour of raising the retirement age as part of a series of measures designed to protect future taxpayers from the bill for an ageing population.

The CBI threw its weight behind a higher retirement age. John Cridland, its deputy director-general, said: “In order to fund better pensions in 20 or 30 years’ time, people are going to have to save more and work longer.”

Mr Cridland said he believed that the Government was raising the issue now to soften the blow before the full impact of its reforms can be put in place.

But pensions experts fear that the Government’s attempts to push through the change could be undermined by a deal struck between Alan Johnson, the Trade and Industry Secretary, and the public sector trade unions last month. In the face of strike threats from the unions, Mr Johnson caved in over plans to make public sector workers retire at 65. Public sector workers currently receive their pensions at 60.

Stephen Yeo, senior consultant at Watson Wyatt, the actuary, said: “This is going to make it difficult for the public to accept any change to the retirement age, which will be a great shame. It was clear that Turner was moving in this direction, so the public sector climbdown has come as a complete bodyblow.”

Most pensions experts support the idea of an increase to the retirement age, because increasing life expectancy is pushing up the cost of both state and private pensions. In 1950 the average worker retired at the age of 67 and could expect to live a further 10.8 years. By 2004, the average retirement age had fallen to 64, and new retirees could expect to live for another 20 years, spending more than 30 per cent of their adult life in retirement.

Kevin Wesbroom, principal consultant at Hewitt, the actuaries, said: “With life expectancy increasing at the rate of two months every year, you need to increase the state pension age to 67 in 15 years just to stand still.”

Alison O’Connell, director of the Pensions Policy Institute, said that raising the retirement age made sense. She said: “We are living longer. The question is when and how much the age limit should be raised by. Longevity has improved for everyone across social classes. I believe that there is no other way to pay for a better state pension, except by increasing taxes.”

There were fresh signs yesterday that the private pensions sector is in a deepening crisis. The National Association of Pension Funds (NAPF), which hosted the conference, gave warning that more employers were planning to close generous company schemes because of the rising costs on the funds.

The NAPF yesterday revealed that less than half of salary-related pension schemes in the private sector are now open to new members. The NAPF said that over the past 12 months, 37 employers had closed their final salary pension to new members.

Christine Farnish, chief executive of the NAPF, said that its survey this year, which covered more than 400 employers operating more than 1,100 pensions, provided more evidence to show that firms were near “breaking point” in supporting their pension schemes.

She said: “Employers have been struggling with the increased cost of providing workplace pensions for some years now. The last year has seen another hefty chunk of regulation and cost piled on to them.”

The survey found that companies were buckling under the costs of supporting the Pension Protection Fund, which was set up by the Government to provide employees with a safety net if a scheme goes bust.

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