The Pensions Bill currently going through Parliament will be amended from the current timetable to cap the increase at a maximum of 18 months.
Iain Duncan Smith: "We have listened to the concerns of those women most affected by the proposed rise in state pension age to 66 and so we will cap the increase to a maximum of 18 months. We have always made clear that we would manage any change fairly and ensure any transition is as smooth as possible."
Minister for pensions Steve Webb, added: "We want to end the uncertainty for women waiting to learn what their State Pension Age is and we will be communicating with those affected so that they can properly plan for their future."
The Pensions Bill currently going through Parliament proposes the state pension age for women will reach 65 by November 2018 and rise to 66 for both men and women by April 2020. Instead the amendments laid yesterday will propose that men and women reach 66 by October 2020.
The Government brought forward the increase in state pension age to 66 because of "dramatic increases" in life expectancy and the need to ensure that no unfair burden is placed on the next generation. The Government has said it will spend £45 billion extra on pensioners by 2025 because of the triple guarantee to uprate the basic State Pension by the highest of earnings, prices or 2.5%.
Joanne Segars, chief executive of the National Association of Pension Funds, said: "This takes some of the sting out of what was a very raw deal for many women.
"A quarter of a million women who were set to wait up to two years longer for their pension will now see that wait capped at 18 months.
"This is a useful bit of leeway. People need time to prepare their finances for the transition into retirement, and there's now a clearer ceiling on what to expect.
"But a lot of women in their late 50s are still being told to wait another 18 months, and many will struggle to bridge the gap. The Government could have done a bit more to give them extra notice.
"As we all live longer we are going to have to work longer. The state pension age for women should be brought into sync with men's, but it needs to be done fairly.
"The trade-off for working longer must be a more generous state pension that sets a clear foundation for retirement."
Chris Ball chief executive of The Age and Employment Network (TAEN), said: "Whilst this acknowledges the unfairness of asking some women to put up with unacceptable delays before receiving their state pension, it will still require those in the affected age group to wait a further 18 months longer for their pension than they expected or planned for.
"The soundness of raising the state pension age and forcing people to go on working when the number of jobs available is shrinking will be rightly questioned. Moreover, the Government continues to ignore the fact that the broad-brush approach to raising state pension ages for all is deeply unfair anyway.
"For women and men in physically demanding jobs to be asked to wait for their pension without making adequate provision to allow them to change roles and ease down in later life is harsh at best. While some good employers recognise this and have made flexible working and retirement available, there are huge numbers of jobs where this is just not possible and, with part-time roles in free-fall, people will be asking: 'Are you really expecting us to work until we drop?'."
Trade union unite, has warned the announcement poses "very real financial dangers" for women born in the 1950s.
Unite assistant general secretary, Gail Cartmail said: "This announcement must not be allowed to mask the injustice of the Government's plans to create an automatic link to the state pension age and the normal retirement age for women who are members of public sector pension schemes.
"Apart from being unfair and disregarding the nature of the work done, such a link creates a precedent that may well leak into private sector schemes. This would be in the same way that some private sector schemes are being hit with the 15% reduced value of benefits due to the switch from Retail Price Index (RPI) to Consumer Price Index (CPI) which was imposed on all public sector schemes.
"There are still not-so-hidden financial dangers for this group of women, thought to number about 330,000, now in their late fifties. Iain Duncan Smith has given them a crumb of comfort today."
When the State Pension Age was set at 65 in1926 there were nine people of working age for every pensioner. There are now three people of working age for every pensioner and that is set to fall to nearer two by the end of this century.
The Report Stage and Third Reading of the Pensions Bill are scheduled for Tuesday 18 October.