The new agency will also have a site in Glasgow, with the two locations together creating at least 1,500 jobs split evenly between the two cities.

Through the terms of the Scotland Act 2016, 11 additional benefits are in the process of being devolved to Scotland including disability living allowance, personal independence payments, carer’s allowances and winter fuel payments.

The First Minister made the announcement as she met social security stakeholders in Dundee.

She said: “Having powers over newly devolved benefits presents an exciting opportunity to create a social security system for Scotland that is fairer and based on dignity and respect.

“I’m delighted to confirm that Dundee and Glasgow will be the locations of the new social security agency. Establishing headquarters in Dundee demonstrates our support for the city’s ongoing regeneration. Having two sites will ensure that economic benefit is spread between the east and west of Scotland and across the cities’ neighbouring areas.

“The agency will also have a local presence with additional staff working across the country that will ensure that economic benefit and jobs will also be spread across all parts of Scotland.

“Our new social security system is the largest, most complex programme of change in the history of devolution. We will continue to work hard to engage with local partners and our innovative social security Experience Panel as we develop the service.”

Dundee City Council leader, Councillor John Alexander, said: “This is an exciting announcement and major vote of confidence in Dundee by the Scottish Government. The agency will bring with it several hundred new jobs and will provide a notable boost for the local economy generally.

“I have been working closely with the Scottish Government to ensure that our shared aspirations can be delivered and this will no doubt complement that work and will be a great asset to Dundee. Our close working relationship with Scottish Government is a strength for the city and I’m particularly pleased to see that the pioneering and innovative approach taken by Dundee City Council and partners to welfare advice and support is being recognised.”

Glasgow City Council leader, Councillor Susan Aitken, added: “The new Social Security agency will benefit the whole of Scotland, but its great news it will have such a direct benefit to the people of Glasgow, and I want to congratulate Dundee on hosting the headquarters.

“Glasgow sits at the heart of a city region and, working with colleagues from other local authorities, we will ensure that the agency has the right staff and that people who would most benefit are job-ready and able to take up these opportunities.”

While no details have been announced about the locations of the new sites, further information on the configuration of the agency is expected to come in a ministerial statement on Tuesday afternoon.

The new agency is expected to be fully operational by 2021.