The retirement age should be increased to 70 in exchange for a bigger state pension, the CBI has said in a report.
The business organisation’s report on the future of UK pensions said the rise would help low-paid workers and reduce the need for any means testing.
It wants the change introduced between 2020 and 2030 and also urged firms and staff to put more into company schemes.
The CBI says its plan would see around 7.1% of GDP being spent on pensions by 2050/2051, compared with 6% now.
’Improve incentives’
Regarding company pensions, the CBI said that new employees should automatically be opted into the schemes, as this was the best way of increasing take up among staff.
Yet it rejected calls from the TUC to make it compulsory for both companies and individuals to pay into a pension scheme, saying this could lead to some firms actually reducing their contributions to the legal minimum.
It also warned that this would increase the cost to business by up to £22bn ($41bn) a year.
The CBI is instead calling on the government to increase incentives for both companies and staff to pay into pensions schemes, particularly for small and medium sized firms and people on low earnings.
It said this could include the government paying for free financial advice for people in small companies, and the introduction of a Partnership Pension into which the government would match the contributions being made by employers and staff for a limited period of time to kick-start saving.
It estimates this initiative would cost the government around £762m a year.
’Reduce poverty’
The proposals are being put forward by the CBI’s Pensions Strategy Group, which is made up of senior business leaders and led by Unilever chairman Richard Greenhalgh.
"Overwhelmingly employers remain committed to pensions and have responded as well as they are able to, given the difficult circumstances that have confronted them," said Mr Greenhalgh.
"There are no easy solutions but this report is a serious attempt to assess how we avoid widespread pensioner poverty in the decade ahead.
"The UK’s voluntary approach must be reinvigorated and we are confident it can be. That means employers, government and individuals recommitting to pensions and each accepting their responsibilities."
But Neil Duncan-Jordan, spokesman for the National Pensioners Convention, labelled the CBI’s plans on longer working a "backward step".
"It is nonsense to suggest that to give everyone a decent state pension will require people to work until they drop," he said.
"The money already exists in the National Insurance fund to pay all 11 million pensioners £105 immediately and to suggest that we can only fund it through making people work longer is a backward step."