Pension worries: An increasing British concern

Adair Turner also said it was "very unfortunate" that many employers had closed their pension schemes in a bid to cut costs.

Where possible employers should find a way to keep employee pension schemes open, he told the Observer.

Mr Turner, the former director general of the Confederation of British Industry (CBI), was appointed by the government to review the state of UK pensions.

Mind the gap

Pension experts estimate that people in the UK are currently saving �27bn less than is necessary to pay for the standard of living they would like in retirement.

The only thing that is clear in this story is the increase in the average retirement age Adair Turner

However, Mr Turner believes this figure is only scratching the surface of the UK's looming pension crisis.

He said official estimates of future life expectancy were likely to be soon revised upwards.

As a result, an ageing population would have to be supported by a shrinking workforce.

Time extended

Last December the government announced in its pension green paper plans to offer incentives to workers who choose to work on beyond the age of 65.

In addition, from 2006 the retirement age for new public sector workers is to be increased from 60 to 65.

Mr Turner indicated that the move to extend working lives was inevitable.

"The only thing that is clear in this story is the increase in the average retirement age," he said.

However, the green paper has been widely criticised for not acting to halt the widespread closure by firms of employee defined benefit - also called final salary - pension schemes.

Pension retreat

Final salary schemes have traditionally been seen as the best type of pension a worker can get.

They guarantee a retirement income based on a percentage of your salary every year for the rest of your life.

The stock market falls of recent years have meant that the total assets held by many company schemes have shrunk.

If assets fall below liabilities, employers are duty bound to prop up ailing final salary schemes in order to ensure members are paid their benefits in full.

According to report by the Association of Consulting Actuaries (ACA), almost three-quarters of schemes are now closed to new entrants.

"At the moment the defined benefit scheme is in retreat. I think it would be very unfortunate if the private sector pulled out of defined benefit schemes," Mr Adair told The Observer.

Mr Adair is due to report on the health of UK pensions next spring.