Held in the House of Lords, the annual Queen’s Speech sets out the agenda for Parliament over the next year.

She said: “My Government will bring forward measures to modernise the pension system and reform the state pension creating a fair, simple and sustainable foundation for private saving.

“Legislation will be introduced to reform public service pensions in line with the recommendations of the independent commission on public service pensions.”

The changes will mean the state pension age will be moved up to 67 between 2026 and 2028.

The Public Services Pensions Bill implements reforms to public sector pensions, extending the age that people can withdraw their pension and suggests moving workers from final salary schemes to career-average schemes.

It also builds on changes announced by the Chancellor George Osborne in this year’s Budget on introducing a new flat-rate payment to replace age-related allowances.

Joanne Segars, chief executive of the National Association of Pensions Funds, said: “This is another big step towards a simpler, more generous state pension that no longer penalises people for saving.

“A new system will take millions out of means-tested benefits and will encourage people to take control of their old age by saving towards it.”

The Queen also announced the Banking Reform Bill which will ring-fence retail banking activities from investment banking activities. This follows on from changes announced last year within the Vickers Report.

Kevin Burrows, financial services leader at PricewaterhouseCoopers, said: “All banks are already undertaking enormous changes to their business models in light of trading outlook and pressure to generate acceptable returns for investors for the increasing capital that has to be invested.

“The emerging risk is that as the banks become regulated utilities, some banking activities may be pushed into the largely unregulated shadow banking sector. Fixing one problem while another begins to emerge must be avoided.”