Workers could benefit from up to £32000 by staying on at work for an extra five years under Government plans unveiled last week.

This is one of the elements of the Government's plans to encourage people to work past the current retirement age.

At present, employment rates amongst 16 to 64 year-olds is just short of 75%. The government hope that initiatives such as this will help to increase this rate to 80%.

Malcolm Wicks, Pensions minister said: "We are working towards ending the shame of perfectly capable workers being in work one day and then effectively out the next just because of their age."

But he reassured people by adding: "It is not about forcing people to work longer, far from it. Instead we want the work place and the state to be flexible."

The new plan would mean people who work until they are 70 could receive a £32,300 tax-free lump sum. Those holding on for ten years delay would get a £77,090 payment. Those who do not want the cash can opt for an increase in their weekly pension.

Mr Wicks' boss, the secretary of state for work and pensions, Alan Johnson, also wants to change the pensions system so that it is no longer an incentive not to return to work.

Mr Johnson added: "All the research shows that people want the choice about how and when they retire. Already over one million people have chosen to carry on working in some form past pension age and I want to encourage people who still have something to offer in the work place to keep on working.

"The chance to defer offers our older workers a real choice about what they want to do when they get to State Pension Age. A typical person who defers for five years could be looking at getting a taxable lump sum of anything between £20,000 and £30,000."

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