Pensioners will be financially better off under the Lib Dems than any other party, leader Charles Kennedy has said.
Kennedy says pensioners will live in dignity and security under Lib Dems
Single pensioners over 75 will receive an extra £100 a month and couples an extra £140 under the proposals.
There will be free personal care for the elderly. The council tax will be replaced with a local income tax, with six million pensioners paying nothing.
Under Labour the basic pension will rise with prices. Tories would restore the link between pensions and earnings.
Outlining his plans for the elderly, Mr Kennedy said it was "inexcusable" that two million pensioners lived below the poverty line.
He accused the government of deliberately setting the state pension at 25% below that level, and of expecting pensioners to undergo demeaning and complicated means-testing to claim back the cash they are entitled to.
"It is our older generation who supported and constructed the welfare state - the NHS and the universal pension system," he said.
"It is they who have faithfully paid their taxes and their National Insurance and they deserve to see the benefits of their investment in the British state when they reach retirement age."
Mr Kennedy said the Institute of Fiscal Studies had confirmed that pensioners would be better off under Lib Dem policies, compared to other parties.
Plans for a "citizen's pension" for the over 75s would lift over a million pensioners out of means testing with an extra £100 a month on the basic state pension, he said.
Pensioners 'deserve better'
"And because it will be based on residency not on national insurance contributions, it will do away with the scandalous discrimination against women who have incomplete contribution records," he said.
"Our pensioners deserve better than the unfair council tax which hits them the hardest.
"Instead we will introduce a local income tax based on ability to pay - four out of five pensioners will see lower bills.
"Six million pensioners will pay no local tax at all.
"Free personal care for the elderly will mean that no-one will have to use up their life savings, sell their home, or be a burden on their families to pay for help with washing, feeding and dressing if they contract a long term illness such as Parkinson's or Alzheimer's."
Mr Kennedy added: "These ideas are fair, affordable and will provide dignity and security for many older people in this country."
The citizen's pension would cost £12.4bn over the first Parliament and would be introduced in 2006-7. It would be paid for by Whitehall savings, including the abolition of the Department of Trade and Industry.
Lib Dem plans for a new top rate of income tax of 50p in the pound for earnings over £100,000 would pay for free personal care for the elderly.
Mr Kennedy insisted his party would not be minded to put up taxes in the event of an economic down turn. Instead it would cut spending.
"You would have to be more prudent about what you do in terms of spending," he said.
Pensions spokesman Steve Webb said the party would not be calling for compulsory pensions' contributions, but it would support moves which meant workers automatically signed up to company schemes unless they opted out.
Mr Kennedy, who appeared separately on a BBC Question Time special with Tony Blair and Michael Howard, said he and the Tory leader would have been willing to take part in a head-to-head - only the prime minister resisted.
He said he hoped it would be the last general election where the leaders of the three main political parties were not quizzed before an audience at the same time.
Tony Blair and Gordon Brown, on a visit to the Vale of Glamorgan, South Wales, said only Labour could be trusted with the nation's finances.
Mr Brown used his speech to attack Mr Howard's record in government, particularly as pensions minister at the time of pensions mis-selling.
Later Mr Blair said Lib Dem plans to scrap the council tax and introduce a local income tax would hit two or three earner families the hardest.
At a press conference in Cardiff, Mr Howard promised a rebate of up to £500 for the over-65s if the Tories win the election.