O'Donnell scrapped the mandatory retirement age for all staff below the most senior levels and promised to remove it for everyone in the Senior Civil Service as well.
This means, that from April 2010 all staff who wish to carry on working after 65 will be able to do so, with government departments benefiting from their continuing experience and skills.
O'Donnell, who is also head of the Home Civil Service, made the announcement on National Older People's Day. He said: "We should not put an artificial and unnecessary cap on the contribution of long serving, dedicated staff - at any grade. I am delighted that we will be freeing up the potential of our older, senior civil servants to continue to serve.
"Today's move also shows the Civil Service is committed to using the knowledge and experience of its increasingly diverse workforce to improve the delivery of public services for everyone.
"Like any successful organisation we need people who have experience in key areas, as well as those with fresh ideas to challenge traditional methods. This announcement demonstrates our commitment to providing greater working flexibility for all civil servants."
