Talks to break the deadlock in the long-running dispute over the pensions of two million local authority workers have broken up without agreement.
Employers want to end the current scheme – which allows some workers to retire at 60 – because they fear it will breach new age discrimination legislation.
But unions have threatened to strike if the pension age is raised to 65.
Deputy prime minister John Prescott met employers and union representatives on Monday – but no deal was reached.
However, his department described the talks as “very helpful and constructive”.
GMB national officer Brian Strutton said both sides had been trying to find a way forward.
The scheme’s “rule of 85″ – which allows favourable early retirement – makes the local government pension scheme unique.
It means that members can choose to retire at 60, with no penalty for doing so, if their age plus years of membership in the scheme adds up to 85.
Employers feel new age discrimination laws from next October will mean the rule has to be scrapped.