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According to insurer Life Trust's Costs of Retirement review, retirement costs the average household £413,000 and more than £700,000 where people live to the age of 100.

The research is based on a long term inflation rate of 2.3 per cent but it also predicts if inflation increases to 4.6 per cent, the cost of retirement for a 65 year old reaching the age of 100 would be £1.3m.

Early retirement was also found to be costly with a pensioner of 50 needing an additional £373,000, or £25,000 a year, to fund his retirement.

Andy Briscoe, chief executive for Life Trust, said this only served to show how the issue of longevity would impact on retirement planning.

He said: "People are living longer, healthier lives. This is great news but only if people have the finances in place to really enjoy their post career years.

"The combination of rising life expectancy and the impact of inflation over time can have huge financial implications and this report allows us, for the first time, to see the scale of these trends.

"With more and more people reaching 90 and beyond, and with 90 becoming the new 70 in terms of healthy ageing, it has never been more necessary for the industry and individuals to understand the true cost of modern retirement."