Under plans announced by prime minister David Cameron, 18 to 21-year-olds would have their Jobseeker's Allowance stopped after six months unless they agree to take part in community projects.
Other measures include severely reducing the number of 18 to 21-year-olds on housing benefit and reducing the total amount of benefits one household can claim from £26,000 per year to £23,000. Those with children will be exempt from the proposed cuts.
Cameron claimed the measures would help to "effectively abolish youth unemployment".
"I want us to end the idea that aged 18 you can leave school, leave home, claim unemployment benefit and claim housing benefit," he said. "We shouldn't be offering that choice to young people. We should be saying, 'you should be earning or learning'."
Cameron is expected to explain the ways in which the move could fund "up to 3 million apprenticeships" at the Conservative party conference in Birmingham this week.
Osborne to abolish 'death tax'
In another pre-conference announcement, chancellor George Osborne revealed plans to abolish current rules on drawdown pensions that mean any unspent money from savers' pensions is taxed at 55% before passing to the next of kin.
Unlike Cameron's announcement, this change is due to come into effect in April 2015, before the general election.
The changes will only apply to drawdown pensions, in which savings are invested in the stock market, and not annuity-based products.
From next April relatives will only have to pay marginal income tax rates on pensions savings, most likely to be 20%.
Osborne claimed this will give people the chance to pass on "hard-earned pensions" to their families without any extra costs.
“The children and grandchildren and others who benefit will get the same tax treatment on this income as on any other, but only when they choose to draw it down,” he said.
Hargreaves Lansdown head of pensions research Tom McPhail called the changes a "mixed blessing".
"They will encourage investors to take the maximum possible advantage of their pension contribution allowances, which is certainly a good thing," he said.
"It is likely to significantly boost demand for income drawdown in retirement and to diminish the relative attraction of annuities," he explained. "It will also encourage investors to preserve their pension funds to meet the cost of care funding."
