Chancellor George Osborne has announced the state pension will increase by £2.95 per week from next April, while the age at which the pension becomes payable will rise to 68 in the mid 2030s and 69 in the 2040s.

Current pensioners will also be offered the opportunity to to make voluntary national insurance contributions to boost income in retirement. The Chancellor said this would particularly benefit those who reach pension age before the introduction of the single tier, and women and the self employed.

'To ensure the state pension remains affordable in the future, it is essential the pension age keeps track with life expectancy,' Osborne said.

The Pensions Bill to be introduced next year will allow for a review of the pension age every five years, with Osborne saying that a 'fair principle' was that people should expect to spend up to one third of their adult life in retirement. Based on the latest figures, that would mean a state pension age of 68 in mid 2030 and 69 in the 2040s.

Osborne also announced the state pension would be exempt from the benefits cap he announced in the Autumn Statement.