Survey reveals 71% of employees plan to work past age of 65, compared to just 40% two years ago

The economic crisis will lead to a surge in the proportion of people who intend to work beyond the state retirement age of 65, according to a report by the Chartered Institute of Personnel and Development (CIPD).

Some 71% of workers over 55 who replied to the Employee Outlook survey of 2,000 people said they planned to work beyond the state pension age, compared with 40% of respondents to a similar survey two years ago.

Financial issues are the main reason for the trend, with pension funds, savings, investments and house prices all being hit by the recession.

The findings have serious implications for employers, according to the CIPD's reward adviser, Charles Cotton. "With more people planning to work past 65, employers will have to accommodate older workers and motivate those who wish they could be elsewhere."

Workers over 55 were most likely to have accepted that they must work into old age, the survey found. By contrast 70% of 18-24-year-olds did not believe they would be working past 65, despite being the age group least likely to have a generous pension to fall back on.

Alarmingly, less than half of all employees (46%) said they had a pension with their current employer, with just 36% of private sector employees benefiting from an employer-organised retirement fund. "Employers need to review how they are helping their employees save for retirement to get value from their pension spend," Cotton said.

Tom McPhail, head of pensions research at financial adviser Hargreaves Lansdown, said: "The reality is that most people simply cannot afford to retire." He urged people to "save as much as you can, as soon as you can".

The taxpayer is having to bail out the police pension fund with almost half a billion pounds a year, it has emerged. The shortfall has raised fresh questions about the long term viability of public sector pensions – and the public's appetite for funding them.

Figures released by the government in answer to parliamentary questions show the police pension funding gap has more than doubled in two years. They show that last year the Home Office paid a special grant of £481m to fill a yawning gap in pension scheme funding, up from £201m in 2006-07.

The shortfall is all the more concerning given that the government introduced new measures to overhaul the police pension fund three years ago. Despite the changes, the fund now requires massive financial support from the taxpayer.

According to the Lib Dem Treasury spokesman, Lord Oakeshott, under the old pension scheme, a constable who retires after 30 years' service on a final salary of almost £36,000 can expect to draw an annual pension of just under £24,000. Oakeshott estimates that this would cost just over £1m to fund. "We pay twice for police pensions," Oakeshott said. "First through council tax and then as income taxpayers, too."

Rob Garnham, chair of the Association of Police Authorities, which will discuss the issue of police pensions at its annual conference this week, acknowledged that the Home Office top-ups "recognise the scale of the problem, one that applies across the wider public sector".

The policing minister, David Hanson, said an entitlement to a police pension was "a key element of the remuneration of police officers".

"The government recognises the need to ensure that the costs of public sector pensions are controlled and has put measures in place to tackle factors such as the costs of increasing longevity. Increased payments, reflecting actuarial advice, were introduced … as the result of a decision of the Administrative Court at judicial review."

• £9,000 net state payment to low income families
• Greater south-east makes net loss on contributions

Working childless couples in the top half of the income scale pay out an average of £14,651 a year net to the state, according to research published tomorrow that sets out the biggest losers and winners from the welfare state.

By contrast, a working household in the bottom half of the income scale with children receive an average of £9,109 net from the state annually – more than half their income.

The research represents the first comprehensive attempt to allocate tax liabilities and public spending across households, regions and the life cycle.

The research also finds that the highest earning 30% to 40% of households are net contributors to public services. By contrast, more than 80% of retired households are net beneficiaries.

One of the biggest findings is the degree to which the Greater London region is a net contributor. The greater south-east "super region" has 36% of the UK's population, contributes 42% of government revenue and receives 30% of spending.

London contributes high amounts in income tax, national insurance contributions and stamp duty, but receives the largest proportion of spending on transport. Expenditure per head is highest in Scotland and Northern Ireland.

The report also shows having children is crucial to determining whether families are beneficiaries of state receipts.

Non-retired people with children in the top half of the household income scale pay out net to the state £11,748 per year, and non-retired people without children also in the top half shell out £14,651 a year.

The research has been carried out by Volterra Consulting on behalf of the Public Services Trust 2020, a two-year inquiry chaired by the former Audit Commission chief executive Sir Andrew Foster into how public services will operate as spending becomes increasingly constrained.

It goes further than any other work in trying to allocate who benefits from all forms of public spending.

The research also highlights the degree to which an ageing population is going to put even more pressure on public spending. The number of people over 85 is expected to grow by 50% by 2020, leading to huge pressure on pensions, health and social care.

The report shows that 56% of the tax paid by households in the bottom half of earners is accounted for by VAT and other taxes, including road tax and alcohol and fuel duty.

This suggests it will be difficult to increase charging for services or raising VAT further without hitting poor people.

Bridget Rosewell, chair of Volterra Consulting, said: "This report has tried to tie together what people get from public services with what they pay in terms of taxes. It is remarkable how hard this is when it is so important. Citizens cannot judge the value for money of health, education, social care or pensions unless they know how much it costs them.

"The analysis is always presented at an aggregate level which obscures this for individuals and families. More work is being done to look at this over people's lifetimes, but here is a first stab which shows how the childless subsidise families and the point at which the rich start to pay in more than they get out."

Ben Lucas, chairman of the trust, said: "The conversation about cuts to public services is taking place in the dark – even the Office of National Statistics can only allocate 50% of public spending across the nation's households. Our research tries to give a clearer picture of what happens with revenue and spending, and in doing so raises some difficult questions.

"If the worse off are the principal gainers from public service benefits, how can we make sure that they don't become the biggest losers from cuts? Is it sustainable for middle income earners to continue to be winners from the distribution game?

"How are we going to meet the costs of an ageing society when even retired households in the top 30% of earners are winners from the system currently? How can we raise revenue fairly, if VAT and user charges already account for more than half the tax paid by lower income families?

"We need a public debate about these difficult choices, but we can only have that if there is greater openness and transparency about our public finances."

Pensions regulator says as many as 7,000 firms with final salary schemes have used predictions of rising asset prices to delay making payments

Hundreds of Britain's biggest companies have gambled on a strong bounce in the stock market and a surge in profits to avoid closing funding gaps this year in their pension schemes.

The pensions regulator said today that many of the 7,200 firms with final salary schemes were delaying making payments for several years after they included predictions of rising asset prices in calculations to determine how much money they set aside for pension funds.

Companies also justified delaying payments to their funds after they agreed with the regulator that top-up funds would be more affordable in the future when profits were higher.

The regulator said it was monitoring recovery plans following concerns that agreements made before the recession were overly optimistic.

The report by the regulator is likely to spark further debate over the funding problems faced by Britain's final salary pension schemes.

In his last report the regulator said the collective deficit of all funds was around £200bn. Rises in life expectancy, low interest rates and predictions of possible increases in inflation are expected to increase funding costs and widen the shortfall in many schemes.

The value of some companies, including British Airways, is already smaller than the pension scheme they are obliged to fund. Small changes in pension liabilities can add hundreds of millions of pounds to funding costs.

Earlier this year the regulator signalled he would take a hard line against employers that sought to delay payments in order to drive up profits and pay dividends to shareholders. But in recent months he has taken a softer line and agreed several recovery plans that extend payments beyond a standard 10-year target.

David Norgrove, the chairman of the pensions regulator, said schemes were divided into three groups depending on when they made their funding predictions. He said deals with the regulator made several years ago would need to be watched closely.

"The three tranches of scheme valuations have been conducted in very different economic circumstances and this analysis explores some of the effects that the downturn, and other factors such as longevity improvements, have had on scheme funding," he said.

"We urge trustees to continue to take a prudent approach to assessing schemes' technical provisions, to maintain an honest and open dialogue with employers, and to remain aware of the changing economic situation as they focus on the long-term interests of scheme members. The regulator will continue to focus on this shared goal."

Employers are expected to suffer a dramatic rise in pension costs this year after a fall in bond yields used to calculate occupational scheme funding positions.

Pension experts report an acceleration of scheme closures in recent months as finance directors seek to offset escalating costs by minimising the number of people eligible for generous pensions.

Priests face working longer hours and retiring later as CofE looks to cut costs to plug huge pensions deficit

The Church of England refused last night to publish investment advice covering more than £400m of pension assets, despite demands for information surrounding a £350m shortfall in the retirement scheme for priests.

The pension board for the Anglican church's main pension scheme said advice that led the scheme to put all its assets into stockmarket funds was "not a public document".

Shaun Farrell, the board's chief executive, brushed aside concerns that a policy of investing all its funds in shares was reckless and put at risk paying the pensions of thousands of priests.

He said: "We followed the advice of our investment advisers and they stand by that advice."

Actuaries Lane Clark & Peacock, which advises the church scheme and many of the UK's largest pension funds, was unable comment.

The church's defiance followed revelations last week that the pension board, which oversees the retirement scheme, maintained a policy for more than 10 years of investing all pension assets in UK and world stockmarkets.

Last year, the financial crisis triggered a collapse in stockmarkets and pushed share values down by a third. A recovery this year failed to make up lost ground and left many investors, including the church scheme, nursing huge losses.

Church officials believe the only way to make up the shortfall is to cut costs and force priests to work longer and retire later. Plans to increase the retirement age of priests from 65 to 68 and restrict pension rises to inflation are due to be heard by the church's governing body, the General Synod, next spring.

The board has also agreed to switch 30% of its portfolio to highly rated bonds, though not until 2017.

Pension advisers criticised the pension board for following a "flawed investment policy" that failed to follow conventional pensions investment strategies.

They argue the trustees of the board failed to take account of the risk of stockmarket falls.

Independent pensions consultant John Ralfe said: "It is important that the advice is made public because priests have a right to know how their pension scheme came to be so much in deficit. The board has gambled the contributions of hard-pressed parishes on the stockmarket and clearly failed to follow a strategy that took account of the risks."

Tom McPhail, head of pensions research at the UK's largest financial adviser, Hargreaves Lansdown, said a policy that relied on investment in shares was unbalanced and risky.

"Even with God on your side you are going to struggle with a strategy based entirely on stockmarket investments."

Not all pension advisers criticised the church strategy. One senior figure in the pensions industry said it was possible the advisers took the view the church was unlikely to go bust and with a young scheme could afford to take a long view of the ups and downs in stockmarket investments.

"It is possible the advisers judged the church would be around for the long term and could benefit from the higher returns historically offered by the stockmarket," he said.

Farrell said the board spent £120m on providing pensions last year with £110m met from central funds. The £10m used to pay pensions compared with £70m coming into the fund from parishes and dioceses.

Board chairman Jonathan Spencer said: "While we are realistic about the challenges facing the clergy pension scheme, we have already taken a range of actions to manage these with a programme of diversifying our investments to include holdings in property unit trusts, corporate bonds and currency management. Other alternative investments are being examined as a way of spreading risk."

Ralfe said the scheme was always too risky and these recent changes showed the investment strategy was flawed. "At the very least it should have bonds supporting the pensions in payment it is responsible for," he said.

The church pension fund started life in 1998 after a torrid decade in which the Church Commissioners, which handle the organisation's finances, lost more than £800m in property investments. Officials agreed to start a separate, funded pension scheme to pay the retirement incomes of priests and other clergy. Incomes worth two thirds of salary were preserved under the new scheme with a retirement age of 65.

The Church of England pension scheme was funded by contributions from individual dioceses and local parishes. Under a complicated arrangement, priests and pensioners continued to be funded directly by the church for benefits built up before 1998 and by the pension fund for benefits accrued after 1998.

The church spends around £1.1bn a year. The four largest categories of expenditure were clergy stipends, pension contributions and working costs (£317m) other mission and ministry costs (£272m), church and other building repair and maintenance (£200m) and clergy pensions in payment (£113m).

At the end of 2008 there were 9,100 members of the clergy pension scheme with 13,000 pensioners and 1,600 former staff who were eligible for some pension payments. To meet the rising costs of providing pensions, priests, who earn on average £21,000 a year plus a rent-free home, get another £7,797 in pension contributions.

The pension contribution represents around 37% of a national minimum stipend of £19,500 used as a base for pension calculations. A steep rise in the scheme's deficit has pushed the cost of providing a pension to 45% of clergy income, and according to internal figures is set to rise to 57% as the pension board sinks further funds into individual pensions to close the shortfall.

Bishops on the General Synod are known to be concerned at the growing pension deficit made worse by a crash in the value of assets held by the commissioners. Earlier this year the commissioners announced the church's £5.7bn assets declined by £1.3bn as share and property holdings plunged. To cut costs, a recruitment freeze hit parishes, adding to the already low number of vicars, especially in rural areas.

Predictions that the number of people attending Sunday services would fall to less than a 10th of what they are now, added to the gloom. Christian Research, the statistical arm of the Bible Society, claimed that by 2050 Sunday attendance would fall below 88,000, compared with just under a million now.

Even without such a calamitous fall in attendances, income from individual donations could fall steeply. With lower investment returns in the pension fund likely over the longer term, the church's finances look shaky.

An internal report by the trustees of the fund for the synod said: "The pensions board cannot continue, responsibly, to pay out benefits at the present levels unless they receive contributions which they consider necessary in the light of professional advice of their actuaries."

The church's pensions crisis mimics a wider malaise in the UK's pension system. Private-sector schemes that offer guaranteed pensions were in deficit last month by an estimated £200bn and many have been closed to new entrants.

Priests can expect to join the long list of workers who have seen their benefits cut and working life extending. However, few other employers have proposed increasing the retirement age to 68.

Young priests are likely to be told they must join a defined contribution pension scheme without any guarantees. They can expect pensions worth half those of their colleagues.