UK - The UK government should increase the retirement age to 70 to control the rising cost of state pension payments, PwC has said.

However, the consultancy calculated that, even if the retirement age were increased by an additional two years, it would not lead to a fall in the public debt-to-GDP ratio, instead rising from last December's level of 76% to 80% by 2048.

The report, which examined the overall sustainability of UK public finances, argued that if the government chose only to increase retirement age to 68 by 2046 - as currently planned - without significant further savings or tax increases, debt will grow to more than 90% of GDP by 2050.

It further noted that the impact of longevity would be felt both in the case of higher pension payments, as well as long-term care costs for the elderly.

The report said: "Together, these two demographic challenges mean the 'support ratio' of working-age people to those above state pension age is set to fall from 3.6 in 2010 to around 2.4 in 2050."

Calculating the cost of public sector pensions, PwC predicted a 0.5% decline in expenditure in the 40 years to 2050, taking into account changes proposed in Lord Hutton's review, as well as the recent switch in indexation to the consumer price index.

Jack Hawksworth, chief economist at PwC, said: "The government has already taken steps to address this problem through reforms to public sector pensions and has started the process of raising the state pension age."

He noted that the "bigger challenge" facing the exchequer was the cost of long-term care, with a predicted 69% increase in health-related public spending over the next 40 years.