Retirement age needs to rise to 70 and the occupational pension regime should be replaced, according to the Institute of Directors (IoD).

The IoD has launched a radical reform agenda for both the state and private retirement benefit systems. It argues the state pension age should rise to 70, the state second pension and means-tested retirement benefits should be abolished and the current private pension arrangements should be replaced.

Graeme Leach, chief economist at the IoD, said: "Radical simplification is needed. Startling increases in longevity in recent decades also mean that it is unrealistic to expect to be able to fund a potential 25 to 30 year retirement from an effective 30 to 35 year working life. New approaches are needed to recognise this reality.

"The whole area of retirement needs to be looked at holistically, including how we fund the care needs that will come with increasing longevity. We need a state and private retirement system fit for the 21st century. This is a policy journey that needs to begin now."