A flat-rate state pension worth around £155 per week will be introduced from April 2016.
The Pensions Bill, announced in the Queen’s Speech, will introduce a system which will replace the current means-tested method. The concept of a single-tier state pension was first mooted by pensions minister Steve Webb in 2011.
The legislation will also increase the state retirement age to 67 between 2026 and 2028, followed by future increases.
Joanne Segars, chief executive of the National Association of Pension Funds, said: “This much-needed and groundbreaking overhaul has taken another step forward to becoming a reality.
“We are delighted that, after years of campaigning, this reform is on the to-do list for the coming year. We look forward to engaging with the upcoming debate.
“The state pension needs to be as simple as possible. A clearer, flat-rate system will help people see what they need to save towards their retirement.
“It will stop people’s savings being eroded by means-testing and help them retire with confidence. It also supports the recent auto-enrolment reforms.”