Speaking at the Age UK conference in London on Monday, Harman announced a fast-track review of the retirement age.
She said people should be allowed to continue working into their 70s or 80s if they choose to do so but added that the proposals will not affect the point at which the state pension can be claimed.
Harman said: “This is important not just for those individuals concerned but also for the economy as a whole. We have to banish ageism in the workplace that costs the economy up to £31bn per year due to lost GDP.”
Pension consultant Ros Altmann says having a state pension system that relies on mass means-testing means the least well-off people who try to work part-time after 65 will be penalised. She says: “Pension credit penalises any earnings over £5 a week, so if you try to work part-time to supplement your income, you will lose between 40 and 100 per cent of your earnings.
“This policy discourages low or moderate-earners from staying at work at all. This policy must be urgently reviewed, since it would be far better for older people who want to work part-time to be encouraged to do so rather than penalised for it.”
Syndaxi Chartered Financial Planning managing director Robert Reid says if compulsory retirement is scrapped it may have an impact on the benefits that employers offer workers. He says: “If employers do not give older people the same benefits as younger workers, because they might not be able to get the same cover from life insurers, for example, they could be face discrimination action. Will that lead employers to stop offering benefits to everyone?