The number of qualifying years needed for a full state pension is to be reduced from 44 (for a man) and 39 (for a woman) to 30 for both men and women from April 2010.
 
Announcing the proposal, Secretary of State James Purnell said: "Since 1997 we have reduced absolute pensioner poverty by 1.9 million and our radical reforms of the State Pension have made it fairer, more generous and more widely available. By 2010 around 75% of women reaching State Pension Age will be entitled to a full Basic State Pension, rising to over 90% by 2025, compared to around 35% today.

"However, we are mindful of the potential disadvantages faced by those who do not have a full work history, mostly women and those with caring responsibilities. I would like to pay tribute to the tireless efforts of Baroness Hollis who has championed their cause so effectively.

"This is fair, affordable and straightforward - and it will give more people the chance of a more secure future to look forward to in retirement."

Other changes to the pension system under the Pensions Act 2007 and current Pensions Bill include:

• New weekly National Insurance credits, which will recognise caring for children or disabled people in the same way as paid work. These credits will replace Home Responsibilities Protection and will count towards both the Basic State Pension and State Second Pension.
• Equality of opportunity for male and female employees to build up a private pension. The Government expects up to three million extra women to participate in workplace pension saving, many of them gaining access for the first time.
• Around half a million women who are already saving will benefit from a higher employer's contribution.

Reactions to the proposed amendment have been generally positive. Gordon Lishman, Director General of Age Concern, said: "We are absolutely delighted by this decision which will give thousands of older women the opportunity to build up a better state pension. For too long women have been dealt a poor pensions hand, simply for choosing to stay at home and care for their family.

"Today's announcement is a victory for a generation of women who have been ignored by previous pensions reforms. We have long-campaigned for this amendment to the Pensions Bill and we are thrilled that the Prime Minister's recent pledge to deliver a fair pensions deal for women is being honoured."

Rachel Vahey, Head of Pensions Development at AEGON says: "This change will greatly help a significant number of stay-at-home mothers and carers who, due to their inconsistent working patterns, have not been able to build up a full basic state pension. If the amendment goes ahead, they will be able to take steps to increase their basic state pension retirement income. It's heartening to see the Government has listened to the industry and is willing to make changes to pensions that reflect the way people live their lives today."

Ian Naismith, head of pensions market development at Scottish Widows, said: "While this move by the Government is great news for women, there is still a long way to go to support women, and encourage them to save for the long term rather than for a rainy day, which is more prevalent amongst women."

Scottish Widows has called for the Government to review pension incentives to encourage more women to build up pensions in their own right.  The proposals include:
• A rebadging of pension tax relief to make it simpler to understand - for example, by making it clear that for every £4 an individual contributes the Government will add in £1;
• The ability for pension contributions made by spouses and registered civil partners to be treated as made by the payer rather than the recipient for tax and limits purposes;
• Limited ability to withdraw pension funds before retirement to meet specified costs;
• And an overhaul of means-tested benefits, including a review of the effect on housing benefit and discounting of ISA savings and small amounts of pension from means-testing.

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