Pensioners on a full single rate will receive more than $30 a week extra under changes announced in tonight's Federal Budget.
However those who are looking to retire will have to work longer, with the Government progressively increasing the qualifying age for the pension to 67 years.
Under the changes, the pension for single people will be raised to $32.49 a week, while couples will have their pensions increased by $10.14 a week.
Budget 2009: summary The changes cover not only the aged pension but the disability support pension, the carer payment, the veterans' pension and the war widows' pension.
The decision follows months of campaigning by pensioner groups, which argued that single people were finding it difficult to survive.
But Australians will have to work for longer before they even qualify for the pension.
Under changes announced tonight, the age at which people qualify will increase at a rate six months every two years, beginning in 2017 and reaching 67 years in 2023.
The government said the changes to the pension age were needed to support the long-term sustainability of the system and reflect improvements in life expectancy.
The massive shake-up of pensions was in response to the Government's Harmer pension review.
"These are the most significant reforms to the pension since it was introduced 100 years ago,'' Families Minister Jenny Macklin said.
Key features of the federal government's pension reform:
Single pension increase of up to $32.49 per week and $10.14 per week for couples from September 20 at a cost of $14.2 billion over four years. Progressive increase to qualifying age for pension to 67 years by 2023. Introduction of carer supplement of $600 per annum for carer payment recipients and an additional $600 per annum for carer allowance recipients at a total cost of $1.8 billion over five years. For full coverage and analysis see Wednesday's Mercury. 
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