Older workers who want to continue working after turning 65 will be able to do so within two years.

The re-employment age will be raised to 67, with the law to be updated by 2017, announced Prime Minister Lee Hsien Loong at the National Day Rally yesterday.

Giving a definite timeframe for the first time, Mr Lee said the timing was the result of negotiations between unions, employers and the Government. The Government has been mulling over the move since last year.

"From the workers' point of view, 65 may be too early to stop work. Workers want us to raise the re-employment age," said Mr Lee.

"They want to keep working for as long as they are healthy.

"They say 'If I sit at home and do nothing, I will go ga-ga'."

Singapore introduced the idea of re-employment three years ago. While the official retirement age is still 62, bosses must rehire healthy workers who have performed satisfactorily until they reach age 65, or give them a one-off payment.

While it is still too early to judge, the policy seems to be working well so far, said Mr Lee. "Unions and workers were happy, employers have accepted it, they are adjusting and starting to benefit from it."

With two years to go for the next age hike to kick in, companies will have time to work out arrangements so that the older workers can contribute and not be a burden to their employers, he said.

The issue has always been a contentious one, with unions fighting to increase the age till which workers must be hired, while some employers resist the change.

It took 19 years for the Government to raise the retirement age from 55 to the current re-employment age of 65. The impending change is part of an action plan that a Ministerial Committee on Ageing, headed by Health Minister Gan Kim Yong, is putting together.

The details of the plan, which aims to make Singapore a model of successful ageing, will be announced soon, said Mr Lee.

The labour movement yesterday hailed the move, with National Trades Union Congress deputy secretary-general Heng Chee How telling The Straits Times that older workers have been wanting more legal teeth to their appeals to companies to hire them for longer.

"The labour movement has negotiated hard with tripartite partners for this over the past few years," he said. "The focus now must be for all companies to get ready for the enhancement."

Mr Lee, who devoted a section of his speech last night to older Singaporeans, pledged that the elderly will always have a place in the country. "We honour them because they brought us here, they brought us up, and they will always have something to contribute to Singapore."

He spelt out the steps taken by the Government to recognise and help senior citizens. The Pioneer Generation Package was one, he said, adding that it was introduced to express gratitude to those who have contributed to building Singapore.

The $8 billion package provides subsidies to help Singaporeans aged 65 and above last year pay for their healthcare costs for life.

Mr Lee stressed that the Government has made "an extra effort" to reach out to these pioneers, including visiting every one of them in their homes.

Those who are "not quite as old" as the pioneers were not forgotten, he added. Some 528,000 Singaporeans aged 56 and above who do not enjoy Pioneer Generation Benefits will get special annual Medisave top-ups of $100 or $200 annually from last year to 2018.