George Osborne is expected to use next week’s spending review to unveil a boost in the state pension to its highest share of earnings for 25 years.
The chancellor is expected to announce a 2.9% rise from April to £119.30 a week.
Thirteen million pensioners would benefit from the increased spending power, according to the Treasury.
It said the increase would make the full basic state pension worth about £1,125 more a year in cash terms compared with 2010.
Mr Osborne is also likely to confirm the starting rate for the new single tier pension – aimed at simplifying the system – will be about £155.
Pensions Minister Ros Altmann said pensioners had fallen below the rest of society because the state pension had not kept pace with average earnings.
She added: “We are now back to the highest level for a quarter of a century – and quite right too. Pensioners deserve to be treated much better than they have been in the past and to have security in retirement.
“They’ve done their best for society, worked hard and we owe them. This government has restored a decent level of state pension and we have further to go.”
Earlier this month, a report by the Social Market Foundation warned many retirees risked wiping out their pension pot in just 10 years as a result of the new freedoms announced by the UK Government.