The Government has been urged to solve the pensions crisis by raising the state retirement age to 70.

The Pensions Policy Institute (PPI) said, given the relatively low level of the basic state pension and people's lack of savings, the debate on raising the retirement age could not be put off any longer.

By raising the retirement age to 70 the basic state pension could be increased to £110 a week from its current level of £75.50 at no extra cost.

Alternatively, it could be kept at its current level for people under 75, but increased to £130 a week for those aged 75 and over.

In a paper, Raising State Pension Age: Are We Ready?, the PPI said the way out of the current situation was either encouraging people to save more or getting them to work longer, which would reflect increased life expectancy.

The PPI argued 90 per cent of people now lived to collect their pension compared with 66 per cent in 1950, shortly after the current system was set up.

People are also claiming their pension for an average of eight years longer than in the early Fifties.

To take full account of these improvements in life expectancy, the state retirement age should be in the region of 72 to 75 and, if it was raised to 70, it might have to be put up again in future as life expectancy increased.

Author of the report Alison O'Connell said: "People are living significantly longer. Health and job prospects for the over 65s are improving.

"Working longer can help to fund better retirement income, and the real prize is, with a higher state pension age, a better pension can be offered at no extra cost."

The higher retirement age could be phased in between 2020 and 2030.