Harriet Harman, deputy leader of the Labour party, last week called for compulsory retirement to be scrapped in an attempt to pave the way for more people to carry on working into their seventies and eighties.
Ros Altmann, former government adviser on pensions, welcomed Harman's proposal. She said: "2010 is the 65th anniversary of the end of the second world war - the baby boom generation are coming up to 65 and they will not want to face decades of penury. As millions of baby boomers come up for retirement, we should not just waste their talents and skills. They have so much to offer and employers should be encouraged or forced to recognise this."
Standard Life, the pension provider, has found that two-fifths of people nearing retirement now are keen to continue working. The insurer calculates that a retiree could boost their pension by £5,136 a year doing this for another five years until 70.
If you don't fancy slogging on to ensure your income lasts for the whole of your retirement, there are plenty of ways to boost the pension you have at the moment.
We examine 10 ways to lift your pension income:
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Defer state pension benefits
Your state pension will increase by 10.4% for every year past state pension age - 60 for women born before April 1950 and 65 for everyone else. For example, if your state pension was £105 a week and you decided to delay drawing it for five years, the pension you would receive would be £159.60 a week, according to The Pensions Advisory Service. However, you will have lost £27,300 of income over the five years, which will take a little over three years to make back at the higher rate of income.
Alternatively you can exchange your increase for a lump sum. The lump sum will equal the amount of pension you would have received plus interest. The rate of interest used equates to 2 percentage points above Bank rate.
If you are deferring a £105-a-week pension for five years, the lump sum would be about £32,000 before tax. This calculation is based on Bank rate averaging 4.5% but the final payment would be adjusted to take account of any interest rate changes made during the five years.
Take your pension in small chunks
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Suppose you have a pension pot of £50,000. You could take £2,000 of this in year one - £500 as a tax-free lump sum and £75 a year pension, so total income for year one is £575 nearly tax-free. In year two you take another £2,000 - £500 as a tax-free lump sum and another £75: total "income" in year two is £650 and so on. John Dawson, head of pensions policy at Standard Life, said: "This is a very tax-efficient way of taking your pension as the bulk of what you are taking is not taxed - only £75 of the £575 is taxable in year one and only £150 of the £650 in year two is taxable."
Buy immediate vesting pensions
Suppose a man aged 74 pays £2,880 into a pension, which is immediately grossed up to £3,600 with basic rate tax relief. He takes the pension straight away and receives a £900 tax-free lump sum - 25% of £3,600 - meaning that the net cost to him is £1,980.
The remaining £2,700 in the pension pot (£3,600 less the £900 tax-free lump sum) buys an annuity of £207 a year. This is equivalent to a return of 10.45% on the £1,980 outlay. Dawson said: "This is great when bank interest rates are only 1% or 2% but is not advisable for those with a shorter-thanaverage expected lifespan."
Keep paying into your pension
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You can continue to pay in new contributions up to the higher of 100% of gross income or £3,600 once you have stopped earning an income. Dawson said: "There are rules to prevent 'recycling' of tax-free lump sums into new pension policies but as long as new contributions are not 'pre-planned' you should be okay."
Don't take cash from your final salary scheme
"The conversion rate from the pension you give up to the cash you get is usually poor," said Dawson. "Either save up a lump sum in an Isa or, even better if your pension scheme allows, take your cash out of your additional voluntary contributions (AVCs) instead of the main pension."
Defer your final salary pension
Some final salary occupational schemes allow members to defer benefits in return for a higher pension later on, under the late retirement rule. Mark Brooks at the National Association of Pension Funds said: "Each scheme will have its own procedure for applying a later-retirement factor, and not all schemes will allow it."
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Don't just plump for the annuity your pension provider offers
If you have personal pensions, in most cases you will have to buy an annuity from an insurance company before you turn 75. But research from the Pensions Income Choice Association has found that even though you could boost pension income by as much as 40% by choosing a more appropriate annuity, only one-third of people chose to do so in 2008. "British retirees could be missing out on hundreds of millions of pounds by not being aware of the options available to them at retirement," it said.
Alternatively, some annuities allow you to change the amount of income you receive, so you can save up for later on in life - or, indeed, spend a bit more while you are young and active.
Vince Smith-Hughes at Prudential, the insurer, said: "The vast majority - 90% - of people purchase a conventional annuity which fixes a level of income for the rest of your life. But there are alternatives."
One is to use an investment-backed annuity, which can be invested in an insurer's with-profits fund - check the financial strength of the company first - or in a range of unit-linked funds.
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Defer your annuity purchase
The annuity rate you get will depend on a number of factors, not least your age. If you defer purchase, you will get a better rate. But you must balance this against your life expectancy as you will miss out on pension income while you wait, and you run the risk of annuity rates falling further.
Use income drawdown
If you do not want to buy an annuity, you can leave your fund fully invested and draw down an income within certain limits. "This will allow you to keep your options open," said Dawson. "An annuity is a once-and-for-all purchase, so you can't change your mind. As you have no clear idea of when you will actually retire, keeping your options open is a good idea."
However, this course of action is riskier because your income will fluctuate depending on the performance of your fund. Many people have been stung by this in recent years of poor stock market performance.
Mix and match pension solutions
Don't think you have to choose just one option for taking your pension fund. Smith-Hughes said: "We advocate a "cocktail solution", where a little bit of everything might be the right solution for some people. If you have substantial other assets in place, then going into income drawdown with part of your retirement fund will be more palatable, for instance."
I'M GLAD TO BE RETIRED
Roger Buddle retired from his career as a human resources manager last October. He says he would not relish continuing working and is glad he has maximised his pension income. Buddle, 65, who lives in Aylesbury, Buckinghamshire, with his wife Valerie, 62, said: "I do think many older people could work if they wanted to - I could have carried on part time."
Both he and his wife have the bulk of their savings in defined-benefit occupational pensions, so Buddle could afford to take a little more risk with his personal pensions. William Burrows Annuities recommended he left one fund invested and bought a with-profits annuity from Prudential with the rest. This guarantees income and he can alter the amount every two years.