The Nationwide Building Society is one of the first large UK companies to change its employment rule to allow employees to work until the age of 75 if they wish to do so.
The move reinforces Nationwide's reputation as a pioneer in removing age barriers at work. The company was one of the first organisations to introduce flexible retirement back in 2001 to allow older employees to work until 70.
The new move comes ahead of legislation to be introduced in autumn 2006 that will set a national default retirement age of 65 and a give employees the right to request working beyond the set retirement age.
Around 12 per cent of Nationwide's employees are aged over 50.
Jeremy del Strother, divisional director personnel and development, said that the new approach to flexible retirement recognised the contribution older employees made to the company.
"Research has shown that there is a strong correlation between employee satisfaction, customer satisfaction and the success of any business," he said
"We have found that older employees help increase the levels of satisfaction amongst our customers. We also know that some employees wish to continue working beyond the normal retirement age, so have enhanced our policies to support those employees, giving them more choice over when they want to retire."
Tim Poil, General Secretary of Nationwide Group Staff Union, said: "We have been working with Nationwide for some time on ways to enhance opportunities for older workers. I am delighted that this has resulted in these innovative and pioneering developments."
TUC General Secretary Brendan Barber said: "It's good to see employers and unions working together to combat ageist attitudes at work. Nationwide has been forward thinking enough to realise the benefits that come from employing older workers.
"I hope other businesses start to follow Nationwide's lead and begin to see the forthcoming age equality regulations as an opportunity not a threat."