INCREASING the state pension age to 67 would cost UK businesses more than £4bn a year in absenteeism, according to a report.

The Pensions Commission, which is due to report next week, is expected to recommend the Government raises the age at which people can claim their state pension from 65 to 67 in a bid to solve the UK's pensions crisis.

But Cass Business School warned that while raising the retirement age would help to address the burgeoning costs of an ageing population, it ignored the problems and associated costs of older workers taking more time off due to ill health.

The report said there were 11.1 million people receiving the state pension, and this would rise to 12.8 million by 2025 if the state pension age was 65 for both men and women.

However, if the state pension age was increased to 67, there would only be 11.2 million people claiming the state pension in 2025, saving the Government nearly £8bn a year.

But it claimed that while this was a considerable saving for the Government, it shifted the burden of cost to industry and failed to address the viability of working until 67.

It added that the £4bn figure was based on absenteeism alone, and did not factor in the declining productivity of workers as they aged.