The retirement age in the UK will have to continue to rise in order to avoid a potential pensions timebomb, the International Monetary Fund (IMF) has warned.

The Bretton Woods institution has claimed that public finances in countries across the western world would be severely affected if the average life expectancy of its citizens rose by just three years.

The potential cost to fund these extra retirement years could cost around half of current gross domestic product (GDP) for most developed countries, the IMF has claimed.

However, the additional bill for the UK could be as much as 59 per cent of 2010's GDP, with £750 billion set to be added to the national debt by 2050 in order to pay for the increased costs.

The additional costs would come from public sector pensions and the state pension, as well as state funds needed to rescue failed private sector schemes which are unprepared for a rise in life expectancy.

The Global Financial Stability Report also claims that the taxpayer is likely to foot the bill for higher retirement costs. 

"With the private sector ill-prepared for even the expected effects of ageing, it is not unreasonable to suppose that the financial burden of the unexpected increase in longevity will ultimately fall on the public sector," the report noted.

The IMF has proposed a number of solutions to prevent pension costs crippling countries across the world, with the body advising governments to either raise retirement ages, boost annual contributions or reduce payouts.

Another potential solution is to link the retirement age to life expectancy rates, a proposal currently under consideration by the UK government.

The report said: "An essential reform is to allow retirement ages to increase along with expected longevity. This could be mandated by government, but individuals could also be incentivised to delay retirement."

In order to offset the additional costs, countries would need to boost their GDP by one to two per cent every year up to 2050.