The government will abolish the 55% "death tax" that applies when people pass on unused pension pots to their loved ones, according to George Osborne.
The Chancellor, as part of the 2014 Autumn Statement, also said he would get rid of inheritance tax for overseas aid workers.
In addition, Osborne committed to completing Lord's Hutton's pension reforms, bringing a total savings of £1.3bn a year to the Treasury.
Osborne said that the government will "fully implement" the pension review, which undertook a "fundamental structural review" of public service pension provision in the UK.
The Independent Public Service Pensions Commission found that the current public service pensions structure has been "unable" to respond flexibly to workforce and demographic changes in the past few decades.
The study revealed that the problem has led to, among other things, rising value of benefits due to increasing longevity, unequal treatment of members within the same profession and unfair sharing of costs between the employee, the employer and taxpayers.