People should be allowed to extend their working lives into older age, said the equalities watchdog on Monday under proposals to scrap the current retirement age of 65.
The Equality and Human Rights Commission said retirement law discriminates against people who want to continue working.
Employers can currently force all staff to retire when they reach 65, regardless of their circumstances, although there are currently 1.3 million over 65s in the workforce.
With the state pension age set to rise to 66 for both men and women in 2024, the EHRC said the law is outdated and called for employers to extend more flexible working hours.
In a survey of 1,500 over 50s, the watchdog found a quarter of men and two thirds of women wanted to carry on working beyond the current state pension age.
Although demand for flexible work is high, it found older employees were dissatisfied with the lower-level part-time work offered beyond 65.
“Radical change is what older Britons are telling us needs to happen for them to stay in the workforce,” said Baroness Margaret Prosser, the commission’s deputy chairman.
“Britain has experienced a skills exodus during the recession and as the economy recovers we face a very real threat of not having enough workers — a problem that is further exacerbated by the skills lost by many older workers being forced to retire at 65.”
She added that recruiting and retaining older workers with more flexible hours “makes good business sense”.
An estimated 15 billion pounds could be pumped into the economy by allowing employees to lengthen their working lives, according to the commission.
The government has promised to review of the law.
