Compulsory retirement ages could be scrapped within four years - to save money

John Hutton said unless people were prepared to work for longer, an "ever greater and frankly unsustainable burden" would be passed to their children and grandchildren.

And he claimed giving up work in your 60s will increasingly be seen as "taking early retirement".

Mr Hutton suggested current mandatory retirement ages could be abolished within four years.

He also said people should be given more financial incentives to delay drawing their state pension.

But business leaders said putting pressure on workers to stay on into their 70s underlined the increasing unfairness of the country's two-tier pension system, in which millions in the public sector get a better deal.

Ministers dropped plans to raise the retirement age for existing public servants from 60 to 65 after fierce opposition from the unions.

But Mr Hutton insisted urgent action was necessary if the economy was not to falter under the cost of increasing numbers of pensioners.

"The days of people counting down the time until they hit 60 and get their carriage clock are diminishing as more employers recognise the value of holding on to the expertise of older workers for as long as they can," he said.

"For decades, retiring early has meant stopping work in your 50s. But as future generations live longer and healthier lives, they will increasingly see giving up work in their 60s as taking early retirement."

Mr Hutton argued recent decades had seen a "seismic shift" in the balance between the proportions of life spent in work and retirement.

In 1950, of those men who survived to retirement the average age for stopping work was 67 and the average retirement ten years.

Today the vast majority survive to retirement - and give up work on average three years earlier.

The typical retirement, meanwhile, has doubled to 20 years as life expectancy has increased.

Mr Hutton, in a speech to the Social Market Foundation thinktank, also said experts predict one in five babies born today will live to 100.

He claimed these factors meant a "fundamental culture change" was necessary if the economy was not to buckle.

Ministers have already set out plans for the age at which people can claim the state pension to rise - initially to 66 in the early 2020s and climbing to 68 by 2046. Without the increase, a 4p rise in the basic rate of income tax in 2050 would be needed to meet Britain's pensions bill, they say.

But Mr Hutton said in 2011 the Government would go further and consider scrapping mandatory retirement ages.

He added that more people should be encouraged to defer taking their state pension - with increased financial sweeteners for doing so.

"The gains from deferral can really be quite significant," he went on. "If, for example, an individual defers a retirement pension of £100 for five years they could boost their eventual weekly entitlement when they do claim to over £150."

Tory work and pensions spokesman Philip Hammond said it was "entirely sensible" to encourage people to work longer as life expectancy increases.

But he accused Labour of creating a "pensions apartheid" between public and private sector workers and said both should be treated fairly.

Blair Gibbs, of the Taxpayers' Alliance pressure group, claimed Labour had "botched" public sector pension reform, adding: "The rest of us are going to have to work into our 70s just to pay the tax bills which result from early retirement for millions of civil servants."

John Cridland, deputy director-general of the CBI, said expecting the private sector to pay for public sector pensions is "unsustainable and unfair".