Pensioners would be £7 a week better off under a Conservative government, the party has said as its annual conference starts in Blackpool.
Officials say opponents of Mr Duncan Smith are trying to oust him
The Tories say they would raise state pensions in line with average earnings, rather than inflation - something the government says is unsustainable.
The party claims the radical policy would cost £5bn over four years - money that will come from benefits savings.
The proposals were unveiled as leader Iain Duncan Smith said he was prepared to sue over allegations, made in a Sunday newspaper, about the running of his private office.
The Tory plans would reverse the policy of former Conservative leader Margaret Thatcher, who cut the link between state pensions and earnings almost 25 years ago.
Since then pensions have risen more slowly, in line with inflation.
The Tories now say that is not enough and want the earnings link restored. This, they say, would mean £7 a week more for a single pensioner and £11 a week for a couple.
The cost would be met from savings in means tested benefits and huge cuts in the government's welfare to work programmes, says the party.
Tory officials hope it shows the party has a distinctive platform.
But work and pensions secretary Andrew Smith said the Tory sums "do not add up".
"These plans would be a cruel deceit on pensioners because they are unsustainable.
"Scrapping the New Deal does not give enough money to cover the escalating costs and will push up youth and long-term unemployment.
"No one can believe Iain Duncan Smith when he claims to be able to cut taxes with one hand and increase spending with the other."
The government says extra money for pensioners is better spent targeted at the poorest old people.
The government says it wants to help the poorest pensioners
Mr Duncan Smith told BBC One's Breakfast with Frost the plan would float one million pensioners off means tested benefits.
The current system destroyed savings and Britain's "savings culture", he argued.
"It is terrible that a pensioner who has worked hard all their life has to go cap in hand to the government to explain why they saved their money and to apologise for saving that money," he said.
Derek Simpson, general secretary of trade union Amicus, said he wanted Labour to restore the earnings link on pensions.
But he was unconvinced the Tory announcement was "anything but a popularist claim ... struggling as they are for any sense of reasoning in what they do".
Opinion polls have shown the Conservatives only slightly ahead of Labour, despite the government's current troubles.
Mr Duncan Smith said the polls showed the government was "roundly hated".
A YouGov internet opinion poll of 2,000 people for the Sunday Times said 57% of those questioned thought the Tory leader "boring".
He defended his performance, saying: "There are two types of leadership. There is the sort of Blair leadership which is full of promises, lots of glitz and glamour and going around shouting the odds. And then the delivery is non-existent.
"There is the other type of leader, who puts in place the firmest policies and the absolute strategy that they will stick to."
The Tory leader said it was his "absolute plan" to cut taxes after the next election - with details unveiled until after the next Budget.
Former shadow chancellor Francis Maude told GMTV that public services should be the Tories' priority. Those costs would make it more difficult to cut taxes in their first term in office, he said.
But Mr Duncan Smith accused the government of spending billions of pounds on red tape.
"Taxpayers know much of their hard-earned money is being wasted," he said.
For example, said Mr Duncan Smith, for every new policeman, there were two new civil servants.
Much of his conference theme will be attacking Labour centralisation and promising voters "freedom and choice".
On Sunday Mr Duncan Smith said he was prepared to sue over allegations about the running of his office.
He employed his wife Betsy in his office for several months after he became Conservative Party leader - even though he had access to party staff.
Officials at Conservative Central Office believe the allegations have been made by Mr Duncan Smith's opponents within the party.
They believe it is part of an attempt to undermine his leadership.
On Breakfast with Frost, Mr Duncan Smith branded the claims "false lies".
"I say categorically to you now if anybody makes such allegations ... I will sue them," he said.