£140 flat-rate pension proposal
Iain Duncan Smith has signalled that the state pension will rise to a flat-rate of £140 as he claimed the current system was too complex and in "crisis".
The Work and Pensions Secretary said his department's green paper, to be announced in parliament on Monday, would encourage more people to save for their retirement.
Pensioners currently receive £97.65-a-week but this will rise to at least £140 at current prices. Under the proposed reforms, means-tested credits, which see nearly half of all OAPs claim £132.60-a-week, will be scrapped in about five years' time as the Government looks to simplify pensions in a similar way to the benefits system.
Mr Duncan Smith said pension credits currently acted as a "disincentive" to save while the Government has moved to require employers to enrol staff automatically in private schemes from next year to boost individual savings for retirement.
He told Dermot Murnaghan's show on Sky News that in order to meet European regulations, men and women would retire at the same time.
The age would rise to 66 for both sexes by 2020 - a move which could bring £14 billion into the Treasury's coffers, he said.
"What we have said is that two things exist," Mr Duncan Smith said. "The first is that it's so complicated that nobody understands it and (they) need to get this right for an income in retirement.
"The second thing is that far too few people are saving as a result. Seven million people don't save at all towards their pensions right now.
"The third element, and really where it's quite critical, is that it acts as a disincentive to save because right now nearly half of all pensioners are on a pension credit top-up which means basically it's a crisis so we need to change that."
The proposals are likely to benefit mothers who currently lose out on their pensions for having taken a career break to raise their children.