The Institute of Directors (IoD) has added fuel to the default retirement age (DRA) debate by declaring that it should rise to 70 as soon as reasonably practical.

The proposal, made in the IoD's new report, Roadmap for Retirement Reform 2009, has been put forward alongside a recommendation to abolish the State second pension and most means-tested state retirement benefits. The IoD also argues in the report that savings made should be diverted to the provision of a universal Basic State Pension, which it says would probably be above the level currently topped up by the Pension Credit.

"Radical simplification is needed," said Graeme Leach, chief economist at the IoD. "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 which will come with increasing longevity. We need a state and private retirement system fit for the 21st Century. This is a policy journey which needs to begin now."

Author of the report and senior adviser of pensions policy at the IoD, Malcolm Small, added: "We were surprised at the appetite for radical reform among IoD members. Both state and private pension systems have now become so complex that people are becoming disengaged from pension saving and are looking for alternatives. If people don't like the structure, they are less likely to stay in it, even if they are auto-enrolled into saving, as they will be from 2012."

The report has been met with concern from the Trades Union Congress (TUC) who argued that its proposals would force older people into a "workless limbo".

"The better off you are, the longer you live and the more years you get to claim a state pension," explained Brendan Barber, TUC general secretary. "A big rise in the state pension age would mean the less well-off lose a much bigger proportion of their pension than longer-living affluent pensioners, who are much less dependent on the state pension in any case.

"With employers fighting hard to keep a retirement age to 65, such a proposal would condemn many older people to a limbo where they are too old to work and too young for a state pension."

The TUC added that the IoD had failed to address the pensions received by FTSE 100 directors.

The new report builds on Leach's Roadmap for Pension Reform, which was published in 2005.

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