Here, we round up details of the new arrangements and assess the main winners and losers.
Update: Plans for the flat rate pension have been brought forward by one-year to 2016, it was confirmed in the 2013 Budget. Read more on the flat rate pension plans here. Happily married: Couples are among the winners in the pension shake-up What is happening to pensions? A flat rate weekly pension will be introduced worth £144 (£7,488 a year) in today's money, although after inflation it will probably be worth around £155 by the time it starts in April 2017. The current state pension is £107.45 a week.Pension age will rise along with life expectancy. The current arrangements still differ for men and women, but both now start getting the state pension when in their 60s. The gender difference is being phased out and the pension age will be eventually be equalised, rising to 66 for both sexes in 2020 and 67 by 2028. The Government is to carry out five-yearly reviews of the pension age but has pledged to give 10 years' notice of any future changes. However, today's teenagers are likely to have to wait until their 70s to qualify. Use the Government's calculator to check at what age you will be able to start claiming the state pension. People will have to make 35 years' worth of National Insurance contributions to qualify for the more generous weekly retirement payments from 2017, up from 30 years now. At the moment, an individual begins to build up state pension entitlement after one year of NI contributions, but under the new system this will be increased to 10 years. The minimum state pension will be £41 a week in today's money, based on 10 years of NI contributions.Taking a career break to raise a family will be counted towards the 35 years of NI contributions needed for a full state pension, following the changesCouples will each qualify for the full new payment as individuals, rather than receive the current less generous joint couple’s rate. More... NI blow for 6m as single flat-rate pension set to be announced for 2017 Cold snap to add £7 a week to gas and electricity bills Could equity release be a good option for you? Find out using our free guide Can you get a better annuities deal? Means testing for the pension credit will end. Pensioners whose income falls short of a guaranteed minimum currently have to undergo detailed assessments of their income and savings. As well as being a huge disincentive to save for retirement, the current system deters many pensioners from claiming pension credit, even if they are entitled to it. An estimated 1.8m older people who are eligible don't claim at present.Complicated 'second pension' and other top-up arrangements will be swept away under the reforms. As well as the current basic weekly £107.45, you can claim a state second pension (S2P), state earnings related pension (SERP) and graduated pension (Graduated Retirement Benefit). There will be a one-off rebasing of state pension entitlements as a result, although the detailed arrangements for people who have 'contracted out' for periods in the past are not yet known. 'Contracting out' has already started to be phased out and will end entirely in 2017.Those in final salary pension schemes – the vast majority now in the public sector – will face higher NI contributions as the right to opt out of the state second pension comes to an end.There will be no more inheritance of pension entitlement for widows and divorcees.The triple-lock inflation guarantee - under which the state pension rises according to the highest of CPI, the rise in earnings or 2.5 per cent - will continue to apply.The Minimum Income Guarantee will stay as a safety net. This is set at £142.70 for a single person in the current year ending April 2013. Family friendly: Mothers who take a break to raise children will no longer be penalised when it comes to qualifying for a state pension Who wins under the pension shake-up?Couples: Married people will benefit, since they will each qualify for the full new payment instead of sharing the lower couple's rate.
Mothers who take career breaks: The years spent raising a family will be recognised and counted in full towards the state pension under the new system.
Self-employed: People who work for themselves can only claim a maximum state pension of £107.45 a week at present, but this will go up to £144 from 2017 for those who have paid NI for 35 or more years.
Low earners: Those whose combined basic and second tier pensions would be under £144 at present will get an income boost.
And who loses?Final salary scheme members: Workers who belong to contracted out final salary schemes pay lower NI contributions at present, but these will rise after 2017. Public sector workers in such schemes will have to pay more - although this will be partly offset by their eventual higher state pension. Another wave of private final salary scheme closures is now likely.
Existing pensioners and people retiring between now and 2017: Those who start getting a pension before the 2017 cut-off will be stuck on the old, less generous weekly pension payments.
Children and teenagers: Pension age increases mean they are likely to wait until they are in their 70s to qualify for state payouts.
Age barrier: Today's teenagers may have to wait until they are in their 70s to claim a state pensionRecent immigrants: Those who have made fewer than 10 years' NI contributions will not get a state pension any more, whereas previously they would start getting something from one year onwards. 'Aussie backpackers' who only work for a few years in this country but become eligible for a pension are among those affected.
Low-paid, manual workers and those living in deprived areas: Life expectancy is closely associated with income, profession and geography so some social groups will be hit disproportionately by future rises in the pension age.
High earners: Under second pension and other top-up arrangements the well-off can currently build up a state pension to a maximum of £250 a week, but they will get no more than the flat rate £144 in today's money in future.
Welsh people: Some 84,000 people in Wales are receiving a pension higher than the level proposed by the Government, according to the Labour party. It says people entitled to such pensions stand to lose at least £10 a week.
