Work and Pensions minister James Purnell unveiled the reforms as part of the Welfare Green Paper, which includes a move to scrap incapacity benefits by 2013 and abolish Income Support.
People on incapacity benefit will be moved to the new Employment Support Allowance (ESA) to help them return to work, which the Government sees as a temporary measure for all but the most severely disabled.
Everyone who is able to work, including lone parents with children under seven, will be moved to Jobseekers' Allowance (JSA).
For the first time, child maintenance payments will not be taken into account when calculating the benefits that parents can receive.
The charity One Parent Families / Gingerbread criticised the plans and said lone parents needed more constructive help to get back to work. They highlighted the need for more flexible and affordable childcare.
In a recent survey by the charity, 71 per cent of lone parents said they were unable to find a job to fit in with childcare or school hours.
Chief executive Fiona Weir said, 'The good news is the proposal to let lone parents on benefit keep all the child maintenance they receive. But most of the proposed welfare reform changes will fail to lift parents and their children out of poverty. We are concerned that the emphasis on compulsion and sanctions is wrong, unnecessary and unworkable.'
The Green paper, No one written off: reforming welfare to reward responsibility, is at http://www.dwp.gov.uk/welfarereform/noonewrittenoff.