Employer bodies, including the Employers' Forum on Age (EFA), the Engineering Employers' Federation (EEF) and charity Age Concern have joined law and pensions experts in warning the government of a pension meltdown.
They said the current consultation document, Age Matters, would force employers to completely rewrite their retirement policies. Organisations would also have to redraw their policies on redundancy, unfair dismissal and recruitment.
The EFA, which represents more than 160 organisations that collectively employ more than three million people, is leading the campaign for changes in the proposals, which are due to become law by October 2006.
EFA director Sam Mercer said, in their current form, the plans represent a distinct lack of joined-up thinking in government departments and display little grasp of the reality of pension schemes.
Mercer warned the policy-makers not to "hide behind a poorly drafted directive" or they would come up against "catastrophic consequences".
Pensions specialist Jonathan Moody from law firm Mayer, Brown, Rowe and Maw, said the proposals would leave employers open to discrimination claims, even if they comply with the letter of the law.
"Rather than run that risk, employers may choose just to close down their pensions and benefits altogether," he said.
David Yeandle, pensions expert at the EEF, said employers could also face legal action from new, younger employees if occupational schemes are closed to new members.
l Ministers trying to ward off a looming pensions crisis as funds suffer from plummeting share prices have devised plans to delay people retiring by giving them up to £30,000 in a lump sum if they continuing working until the age of 70. Critics said people must not be "forced to work until they drop".