The federal government and the Greens have struck a deal that will see the proposed changes to the pensions asset test passed by Parliament, delivering $2.4 billion in savings over four years.

The deal, announced late on Tuesday, came after Opposition Leader Bill Shorten finally revealed earlier in the day that Labor would fight the measures and block them in the Senate.

The compromise with the Greens, which will end the political impasse, is a significant victory for the government and in particular Social Services Minister Scott Morrison.

The Coalition's pension reform plan and Labor's plan to reduce superannuation tax concessions had been the subject of fierce debate in question time.

But the deal, which was struck after the government agreed to extend the consultation period for the tax white paper launched by Treasurer Joe Hockey by six weeks to July 24, provides a political circuit breaker.

The Greens had previously signalled they wanted a review of retirement incomes to be reinstated in exchange for supporting the proposed pension changes.

"Support for the single largest savings measure in this year's budget, following passage of the government's cornerstone small business measures, demonstrates the Abbott government is successfully getting on with the job of implementing our 'have a go' budget," Mr Morrison said.

"As a result of these changes it is estimated more than 170,000 pensioners with low and modest levels of assets will have their pension increased by around $30 a fortnight from January 2017, when these changes take effect."

"Those who lose access to the part-pension as a result of the increase in the taper rate, to the settings that were in place prior to 2007, will be guaranteed access to the Commonwealth Seniors Health Card."

Mr Morrison's proposal replaced the proposed indexation of the pension to the consumer price index, announced in the 2014 budget.

"I commend the Australian Greens, and their new leader Senator [Richard] Di Natale, supported by Senator [Rachel] Siewert, for their constructive engagement with the government on this measure," Mr Morrison said.

Senator Di Natale had indicated on Tuesday afternoon his party could back the pension changes, but on condition that a review of retirement incomes was reinstated.

He said the Greens wanted to see pension changes made a little fairer and superannuation tax concessions addressed, too.

Early on Tuesday, Fairfax Media first revealed that Labor would oppose the pensions changes.

Announcing the decision, Mr Shorten said that the changes would, in effect, set pensioner against pensioner and warned Australians "the Liberal Party is coming after your pension".

The decision marked a "line in the sand", Mr Shorten said, and Labor would not contemplate failure in attempting to block the legislation.

"The Liberal Party has proposed 330,000 pensioners either lose all or part of their pension. Furthermore, the changes which Mr Abbott is proposing to the pension will mean that another 700,000 people now working in their 50s and early 60s will face cuts to their pension," he said.

Labor arrived at its decision after detailed consideration of the effect the changes would have on people leaving the workforce, with half of all people leaving the workforce in the next decade expected to be hit by the measures.

The effect of the changes proposed by the government is thought to be more widespread than first thought, according to independent modelling provided to the ALP, with up to a million retirees to be hit over the next decade.

Mr Shorten contrasted the changes with Labor's proposal to claim $14 billion in savings over a decade from a clampdown on superannuation concessions and said that "in the next four years, the government's own budget papers point to what is unsustainable: it's the superannuation tax concessions".

The ALP will, however, back the abolition of the Seniors Supplement, which will save the budget about $1 billion over four years, as well as changes to defined benefit income streams.  These will deliver another saving of about $460 million over four years.

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