Plans have been announced to phase out the compulsory retirement age of 65 by October 2011. But what will it mean to workers and pre-retirees?

Why is the government doing this?

Many people are not saving enough for retirement and risk not having the income they would hope for if they retire at the "traditional" age of 65.

By working for one year past the existing state retirement age, currently 60 for women and 65 for men, people can increase their retirement income by between 3% and 10%. The government says it wants to tackle age discrimination, but this move will also alleviate the burden on the state.

Am I able to work beyond 65 now if I want to?

It depends. Employers do not have to retire employees once they reach 65, and are free to continue to employ them as long as they wish, but many will insist you leave at 65.

Will I still be able to retire at 65 under the new proposals?

Yes. The government has not indicated it will prevent people from retiring at 65.

Will I be able to retire even earlier?

Some people with private pensions are already able to retire from the age of 55. Individual employers may allow you to retire early.

Will I be able to contribute to my company pension beyond 65?

Yes, you will be able to keep contributing to your pension – you can make contributions and receive tax relief up to your 75th birthday.

As I'll be working longer do I need to save less for retirement?

The government wants workers to contribute more to their pension pot not less – the larger the pension the less of a burden a retiree might be on the state. Most advisers and product providers also see the proposals as an opportunity for people to save more for their retirement. Scottish Widows says ideally people need to be saving at least 12% of their monthly income to make sure they have a comfortable retirement.

Should I stop contributing to my company pension beyond 65?

You can opt out of your pension at any time, so if you want to stop contributing at 65 you can.

Does the change affect my state pension entitlement?

The state pension has its own timetable, which is itself under review. The government is consulting on how it can accelerate the planned rises to the state pension age more quickly than is currently legislated for – initially to age 66 but ultimately to 68.

The government has yet to announce whether those working longer will be able to defer their state pension. BestInvest's senior investment manager, Adrian Lowcock, says: "If they take it at age 66 but work until they are 70, they would pay tax on their state pension as they are still working, so there are plenty of things to be ironed out by the government."

If I work longer should I change the risk-profile of my pension?

Tom McPhail, head of pensions research at Hargreaves Lansdown, says: "If you are planning to work later then you might choose to stay in riskier assets for longer in order to avoid spending years with your pension fund languishing in a cash account."

Lowcock says people will need to tread carefully: "When you are in your 40s you don't know how your health will be in your 60s, so it will be difficult to plan for a longer working life. And if you are 65 and planning on working until you are 68 it would be unwise to suddenly shift your pension into risky territory as you might see its value fall and have to work until you are in your seventies to give it time to recover."

Both recommend people seek the advice of a qualified financial planner.

Will this lead to any new products being launched?

It is too early to say, although Lowcock says Sipps (self-invested personal pensions) might become popular again. "They are flexible and you don't have to state a retirement age."