Employment and Support Allowance (ESA) claimants will be limited to one year of benefit payments for those expected to prepare to return to work, the Chancellor George Osborne has announced.
The ESA reform could impact one million people and applies to those placed in the Work Related Activity Group.
Only the most severly disabled claimants, who are placed in the support group which includes those terminally ill and on certain types of chemotherapy, will be exempt.
Osborne said the measures should save £2bn a year.
Disability Living Allowance (DLA) claimants in residential care will see the two forms of the benefit merged while a new overall cap on benefits will also be introduced.
Osborne said: "We will time-limit contributory ESA for those in the Work Related Activity Group to one year. This is double the length of time than for contributory Jobseeker's Allowance.
"We will also align the rules for the mobility and care elements of DLA paid to people in residential care, generating savings but enabling us to continue with this important benefit.
"We will also introduce a new cap on benefits, so that no family that doesn't work will receive more in benefits than the average family that does go out to work."
Those in receipt of DLA, Working Tax Credit or the War Widows Pension will be excluded from this cap.
