The proposals and the publication of a Command Paper, Bereavement Benefits for the 21st Century: Government Response, addresses concerns that the current system is too complex and out of sync with the needs of bereaved people.
Under the current system, some people qualify for a lump sum payout, while others receive regular payments for up to 20 years with no encouragement or support to return to work - essentially abandoning them to a life on benefits following bereavement.
The Government said it is committed to providing financial support after spousal bereavement, but ministers believe that the payment should provide immediate support, instead of longer-term income replacement, which can discourage rehabilitation into mainstream life, and harm long term job prospects.
Lord Freud said: "Losing a spouse or civil partner is a life changing event emotionally, socially and economically - so it's really important that we offer immediate financial support to people whilst they readjust. But the current system can lead some people into a lifetime of dependency.
"We have, in consultation with wider groups, looked at the rules again and taken the view that future claimants of bereavement benefits should be supported back into mainstream life and helped back into the labour market after a time of recovery."
The Bereavement Payment is expected to be set at £9,800 for a bereaved spouse or civil partner with children and £4,300 for those without children and will be paid in a lump sum, followed by instalments over 12 months. The payments will also be disregarded from Universal Credit and the Benefit Cap for a period of 12 months.
This period is not intended to reflect the time required for 'recovery', but instead to provide a buffer for the immediate financial impact of bereavement.
Ongoing financial need will be addressed through contributory Jobseekers Allowance, Employment and Support Allowance or Universal Credit, depending on circumstances.
The new rules will come into force for new claimants after the next general election.
