Police arrested several demonstrators and tore up banners held up by trade unionists chanting the national anthem
A drop in oil revenues prompted the draft law to end both early retirement and retirement after 32 years of contributions to a pension fund regardless of age.
Retirement age for all Algerians will be 60, under the reform due to come into force in January.
Protests have been banned in public places in Algeria since 2001.
Police arrested several demonstrators and tore up banners held up by trade unionists chanting the national anthem, the correspondent said.
"I was roughed up by police and wounded" above the eye, school director Abdelmalek Zegada said.
Protesters said that many others had been held up at security checkpoints outside the capital and prevented from joining the gathering.
"Police beat up teachers, doctors and workers," said Um Abdelkader, a teacher. "We're all shocked."
Opposition lawmaker Nadia Chouitem said she was sad to see "so much violence".
Fellow parliamentarian Smain Kouadria accused the state of sliding into the behaviour of a "totalitarian state" in the face of "legitimate" demands.
Algeria's parliament is expected to approve the draft law as the legislature is largely dominated by parties who support President Abdelaziz Bouteflika.