IAIN Duncan Smith yesterday warned that young people would not be able to rely on home ownership to fund their retirement as he flagged up plans to simplify the state pensions system.

The Work and Pensions Secretary, having already put forward proposals to simplify the benefits system with plans for a universal credit, signalled a move towards a flat-rate universal pension, that could be set at around £140 a week, for the next generation of pensioners.

At present, the weekly state pension is £98 and £156 for single people and couples respectively. With a top-up for the less well-off through means-tested pension credit, these respective figures rise to £133 and £202.

In a speech to Age UK, Mr Duncan Smith said: "The state pension system is so complex that most people have no idea what it will mean for them now and in their retirement.

"We have to fundamentally simplify the system. And we have to make it crystal clear to young savers that it pays to save."

The Secretary of State noted how less than half the working population was saving for a pension, which was why the UK Government was pushing ahead with plans for auto-enrolment for workplace pensions.

Also he explained that while seven out of 10 pensioners owned their own homes, their grandchildren were struggling to get on the housing market because of rising prices over the last decade.

"The next generation will not be able to rely on bricks and mortar in the way their parents have been able to. It's no wonder our children are increasingly cynical about saving."

Mr Duncan Smith described the pensions challenge as "immense", noting how in 1926 there were nine working people for every pensioner and today there were three. By 2050, there would be just two.

The Pensions Secretary added: "Too many people on low incomes who do the right thing in saving for their retirement find those savings clawed back through means-testing.

"We have to change this. We have to send out a clear message across both the welfare and pension systems: you will be better off in work than on benefits and you will be better off in retirement if you save."

It is thought a move to a simple, single payment would in particular benefit mothers who currently lose out on their pensions because they have taken a career break to raise their children. People need to have worked 24 years to qualify for a full state pension.

Whitehall sources told The Herald the expectation was that Chancellor George Osborne would "give the nod" to a flat-rate pension in the March 23 Budget.

This will be followed by a Green Paper for consultation later this year. A law setting up the system is not likely to be passed this Parliament but by the middle of the decade and implementation will not be until around 2020 when the state pension age for men and women rises to 66.

Rachel Reeves, the Shadow Pensions Minister, was dismissive, saying: "Vague promises of 'jam tomorrow' don't do anything for pensioners today.

"With higher VAT and fuel prices rising, they want help now."

However, pension experts gave a cautious welcome but wanted to know the detail.

Chris Massey, head of pensions at PwC in Scotland, said pension simplification was "good news for people and their employers" as it recognised the "increasing diversity in individuals' career patterns and family circumstances".

He noted how there was a greater shift towards part-time working in Scotland during the recession. "For those individuals who have taken this route, or indeed have taken a career break, it will be a great comfort to know they will no longer be penalised."

He added: "As ever, it is the 'how' and not just the 'what' that is crucial and, in this case, the question surrounds how it will be implemented."