Pensioners and families look set to become one of the main beneficiaries of the chancellor's pre-Budget report - with �2.6bn more for the elderly.

All pensioners will receive an increase of �5 per week for a single person, and �8 per week for couples from 1 April, and a further increase of �3 per week and �4.80 per week respectively in the following year.

In the end, the justice and morality of a non-means tested decent basic state pension will be accepted by everybody

Rodney Bickestaffe, Unison

And the winter fuel allowance will also be increased to �200 per year, effective immediately.

The new child tax credit, which is to be introduced in April, will be raised to �10 a week, or �520 a year.

Meanwhile, the chancellor has targeted poorer pensioners with big rises in the minimum income guarantee.

He is to raise the means-tested income guarantee for pensioners from �78 a week to �92 a week, an additional �700 a year.

We want to end the means test for pensioners

MIchael Portillo, Shadow Chancellor

By 2003, the minimum income guarantee would be set at �100 a week for a single person, and it would continue to be raised in line with earnings.

And he announced that pensioner couples with incomes below �200, and single pensioners with �130 of weekly income, would receive the new pensioner credit.

But Shadow Chancellor Michael Portillo attacked the government's plans, saying that the Conservatives "would do better for pensioners."

Rejects link to earnings

The chancellor rejected calls to restore the link between earnings and the basic state pension, saying too much money would then go to pensioners who are well-off.

He had come under increasing pressure to restore the link from its own supporters, especially after the April increase in pensions came to a measly 75p a week.

At the Labour Party conference in October, delegates forced a debate on the issue and managed to defeat the government.

Since then, pensioners group have held sit-downs in Westminster, and appear to have gained much public support.

Mr Brown said that during a two year "transitional period," all pensioners would receive increases greater than inflation and indeed average earnings.

Rodney Bickerstaffe, the head of the public services union Unison, said that "in the end, the justice and morality of a non-means tested decent basic state pension will be accepted by everybody."

And Gary Kitchen of the National Pensioners Convention, said the rises would "do nothing to dampen pensioners' anger."

But some economists warned that even the linking of pensioner benefits to average earnings temporarily could be inflationary.

"This linking of pensions to the average earnings poses a significant risk for the long-term financing of public finances," said Steward Newnham of State Street Bank.

Minimum income guarantee

The second string in the government's plan to boost pensioner incomes is the minimum income guarantee, which is set to rise to �92 for a single person.

This is a targeted, means tested benefit, which pays for housing costs as well, but requires pensioners to declare details of their incomes and savings - and has proved unpopular with many of them.

But the Director General of Age Concern, Gordon Lishman, said: "The fact remains that most pensioners want a higher basic state pension rather than means-tested support.

"Up to three-quarters of a million of the poorest older people do not claim the income support they are entitled to, either for a lack of information or fear of stigma."

And the use of the minimum income guarantee has come under attack from the Conservatives, who argue that it is too intrusive and involves too much bureaucracy.

Mr Portillo said that he wanted to "end the means test for pensioners."

The government plans, which would extend means testing to savings, would lead to "indignity and humiliation" for more pensioners.

He said the Conservatives would consolidate all the government allowances in a single payment to pensioners, free of tax.

Pensioners credit

The third element in the government's plan to boost the income of pensioners is the pension credit, which will mean that pensioners with small savings will no longer be disqualified from received means-tested benefits, and could receive extra, tax-free payments.

The principle of this credit was announced in the Budget, but further details will be given by the Social Security Secretary Alaistair Darling.

Along with the new stakeholder pensions, which come into effect in April, the idea is to encourage people to save more for their own retirement without having to rely on the state.

It will apply to pensioners on lower incomes, whose small savings make them ineligble for addtional help.