Two million pensioners could be lifted out of means-tested benefits if the latest proposal for a simpler state pension is given the go-ahead.

The National Association of Pension Funds (NAPF), which represents 1,200 UK schemes, is hoping to reshape the UK’s pension system through its ‘Fit for the Future’ programme.

The proposal looks to build on the government’s reforms, scheduled to come into force in 2012, which offers employees automatic enrolment into an existing employer scheme or into a new system of personal account.

The NAPF is proposing the introduction of a new state ‘Foundation Pension’ which would combine the current basic state pension and the state second pension, funded by a number of measures including raising the rstate pension age to 70 by 2046.

This move would be worth an estimated £8,000 a year, giving pensioners an additional £5 per week in income and taking them out of means testing.

The NAPF also propose creating large, low cost, ‘Super Trusts’ which would offer benefits to savers and to employers, who will be able to provide access to high quality pension arrangements. The low costs of ‘Super Trusts’ could add around 30 per cent to the eventual size of someone's pension.

Under the proposals, existing pension schemes will be encouraged to maintain their final salary benefits, without some of the added luxuries, such as spouses’ pensions or inflation proofing.

Joanne Segars, NAPF Chief Executive, said, ‘Our proposals are designed to create a pension system which is fit for the 21st century. They increase the value of the state pension for everyone, radically reduce concerns over means-testing, and increase the value and quality of workplace pensions. The Government's 2012 reforms are a major step forward and our proposals complete the task.’