By Sarah Toyne BBC News Online personal finance reporter

The tax-free lump sum and tax relief on pension contributions will not be abolished, Chancellor Gordon Brown has announced.

A flexible, efficient labour market must not only promote employment but also be fair to parents

Gordon Brown

There had been widespread speculation that the government was planning to scrap or amend the two "sweeteners", which are particularly beneficial to higher-rate tax payers.

The move has been seen as a measure aimed at placating the middle classes.

Its announcement precedes the long-awaited report into the reform of pensions and savings which has been delayed until 17 December.

Mr Brown said: "I can confirm that the tax-free lump sum payment to retirees will remain. Existing tax relief for pension contributions for employees, the self-employed and employers will also remain."

Also widely mooted "benefit sanctions" for the work-shy were part of a package of measures aimed at making work pay and helping low-income families, also included in the pre-Budget report.

Family-friendly measures

New tax and national insurance incentives will be introduced to expand the role of employers in providing childcare for workers, Mr Brown said.

The government will also expand childcare payments to childcare provision by carers within the home, who are not already childminders.

It also plans to introduce further parental time off work for ante-natal care.

Mr Brown said: "A flexible, efficient labour market must not only promote employment but also be fair to parents."

Mr Brown also announced a Treasury-DTI report that will publish proposals for improving work-life balance.

The chancellor confirmed his commitment to the Child Trust Fund, which will give children a nest egg worth thousands when they reach 18.

This was originally announced in the 2001 Budget but there had been speculation it might be dropped.

Support for elderly

The chancellor announced further details of its Pension Credit due to be introduced in October 2003.

The measure will ensure that pensioners on low and modest incomes are rewarded, rather than penalised, for their savings, the Chancellor said.

Taxpayers must not be blinkered by any sweeteners announced today

Chas Roy-Chowdhury, head of tax, ACCA

Mr Brown said a pensioner couple with an income of �150 a week would receive �21.50 under the new credit or �1,100 more each year.

"For five million pensioners this will be the biggest increase in pensions since the old age pension was introduced," he said.

And the Minimum Income Guarantee (Mig) for a single pensioner will rise to �102.10 a week next April.

The chancellor announced further investment into the social fund - a scheme that provides interest free loans and grants to people with an immediate financial need.

An additional �15m will go towards the Funeral Payments scheme, and from April 2003 payments for funerals will rise from �600 to �700.

Tax rise

The measures will coincide with increased taxation.

In his Budget this year, the Chancellor announced a 1% increase in National Insurance (NI) contributions for employees, employers and the self-employed from April 2003.

Someone earning �25,000 a year will lose more than �200 a year from April.

Someone earning �50,000 a year will see their take-home pay reduced by just over �450 a year.

April's Budget also brought a freeze in the income tax-free allowance, and on Wednesday the government confirmed the upper earnings limit would rise with inflation.

Chas Roy-Chowdhury, head of tax at the Association of Chartered Certified Accountants (ACCA), said: "This was a hefty tax rise which came out of the blue for taxpayers and businesses.

"Taxpayers must not be blinkered by any sweeteners announced today, because they will make hardly any difference within the colossal tax rises coming into effect next year."

Council tax rise?

Council tax bills could also rise in the future, through property revaluations, it was announced on Tuesday.

Properties will be revalued to reflect the meteoric house price rises of the past few years.

And the revamped council tax is likely to include a new "premium" tax rate band to take into account the growing number of properties worth more than �1m.

The changes will come into effect in 2007, well after the next general election.