Prime Minister David Cameron kicked off this year’s electioneering with a pledge to keep the triple lock on pensions until 2020.
Cameron is guaranteeing the state pension will rise in line with earnings, inflation or 2.5 per cent whichever is highest.
The state pension is a universal benefit so the generous pledge will apply to millionaires and the poorest alike, guaranteeing them the kind of long-term rises today’s workers can only dream of in terms of earnings growth.
Help for the wealthiest pensioners doesn’t end there. At Prime Minister’s Questions yesterday, Cameron hinted he would keep universal pensioner benefits such as free TV licences and winter fuel payments because it would “not raise much money”.
Meanwhile, Chancellor George Osborne is targeting the under 25s using housing benefit as part of £12bn further welfare cuts after the next election.
Speaking to Money Marketing, Conservative MP Mark Garnier says: “There is a debate over whether any benefits should go to higher rate taxpayers irrespective of what they are.
“The problem is if you start mucking around with these sort of pensioner benefits it can cost more than you save. I understand we are talking about tens of millions of pounds.
“Pensioners also have little wiggle room because you have spent your life preparing for retirement and you don’t have much opportunity to change your circumstances.”
Why would the Government hit the young so hard on welfare given the economic backdrop of high youth unemployment, falling wages and expensive tuition fees? It’s simple – votes.
Wealthy pensioners vote in larger numbers than youngsters so they are seemingly immune from the welfare axe and, with the triple lock in place, are actually forcing deeper cuts in other areas.
In this context, it was refreshing to hear this week of some fresh ideas from the Institute of Economic Affairs, the free market thinktank favoured by Margaret Thatcher.
In a paper published yesterday, the IEA called for the state pension to be means-tested so it acts only as a support for the poorest.
In its place would be an Australian-style system of compulsory pension saving, requiring employees to save 9 per cent of their salaries and possibly higher.
It would be auto-enrolment on steroids and generate private pension pots for individuals rather than a taxpayer-funded defined benefit scheme.
Companies have decided DB schemes are no longer affordable, so why should the taxpayers fund the biggest and most expensive DB scheme of all?
Forty Two Wealth Management partner Alan Dick says: “The state pension is a giant Ponzi scheme. It only works if the population keeps getting richer so it has to change and be paid for in advance.”
The young employee struggling for a pay rise and saving for a house deposit is effectively funding the globe-trotting lifestyles of millionaire pensioners.
Yes, pensioners have made National Insurance contributions all their working lives but NI has long been another income tax in all but name.
The state pension was designed for an era of far lower life expectancy and to stop the elderly falling into poverty, not to boost Sir Alex Ferguson’s income by £107 a week.
The modern replacement is compulsory saving into a private pension. There are myriad problems in the private pensions market to clean up – just look at last year’s Office for Fair Trading report into the DC market – but the principle of compulsory saving is a sound one.
The state should be focusing on the poorest but when wealthy pensioners hold such sway at the ballot box change seems unlikely any time soon.
Samuel Dale is politics reporter at Money Marketing – follow him on Twitter here