State pension payments will rise to an average of £124 a week, an increase of £6 from last year, the government has said.
The basic state pension will increase from £102.15 to £107.45 a week from today and will equate to about 17% of average earnings.
The government said it is spending an extra £4.5bn on pensioners through the uprating of their benefits this year.
Pensions minister Steve Webb said: "My first concern is to make sure our pensioners have a decent income in retirement.
"Uprating the basic state pension by the highest of earnings, prices or 2.5% will have a dramatic impact in driving up the value of the state pension. This is one of the biggest spending commitments we have made in difficult economic circumstances, and will provide more money for pensioners both now and in years to come."
The government said the ‘triple lock' or guarantee to uprate the basic state pension by the highest of earnings, prices or 2.5% will mean that the average person reaching state pension age in 2012/13 can expect to receive an additional £15,000 in basic state pension over their retirement.
The announcement comes as the Office for Tax Simplification revealed the basic state pension could be taxed at source.
At present the state pension is taxable, but it is currently handed out without tax being automatically deducted.
Under the plan it would be subject to the 20% basic tax rate at source - reducing it to £85.96 a week for many pensioners. Better off pensioners would pay 40% tax and get £64.47 a week.
In an interview with The Independent, John Whiting, tax director of the Office of Tax Simplification (OTS), said the issue was at the forefront of its enquiry into how to streamline pensioner taxation.
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