Why I think pensioner bonds stink

A2CWRN Royalty free photograph of pension business headline in UK financial times pension; retirement; old; age; pensioner; prop

With less than 90 days to go to #GE15 (or 'the general election', if you don't spend half your life on Twitter), George Osborne has announced his plans to extend the generous and controversial pensioner bonds scheme.

The bonds launched in January and more than £1 billion was invested by eager pensioners within the first two days alone.

Osborne has now extended the scheme by a further £5 billion, increasing the value of bonds available to a massive £15 billion. He said this will show that the government "backs savers", but almost every political and economic commenter has called it what it is – buying votes.

Osborne is shoring up support from a key Tory demographic – wealthier, older voters – by giving them a generous financial treat just before the election.

Calculate your pension income options

Now, you probably think that's what all governments do, they reward their key voters and try to buy a few more. Few chancellors can resist the urge to sweeten up the electorate in their final Budget statement of a parliament. One headline today even reads: "Well Of Course Osborne Is Buying Votes With Pensioner Bonds, What Else Do Politicians Do?"

But this is different. This is unusually unfair. Here's why:

We are not all in this together

The total cost of to the taxpayer of expanding the bonds is expected to run to around £300 million; Osborne himself stated it will cost "several hundred million pounds. It's good to know that he's comfortable being so vague about the sum when he is talking about millions and millions and millions of pounds.

So if the bonds continue to be as popular as they are predicted to be, that's around £300 million on top of the £325 million the Treasury initially forecast they would cost.

When we're looking at a giveaway worth so much to those with money, it's worth remembering that this is a government that has overwhelmingly targeted its cuts at the very poorest in our society. The Centre for Welfare Reform analysed official figures and discovered that the poorest 20% of our population are bearing 36% of the total cuts – twice as much as average.

By 2015-16, people who need help from social services will be an average of £6,409 a year worse off, while disabled people in poverty will be an average of £4,660 a year worse off.

How can we justify subsidising the wealthy retirees with this scheme while the most vulnerable suffer catastrophic financial hardship?

It's not the best way to spend the money

We've all read stories of impoverished elderly people struggling to cope with their heating bills and buy food at the same time. But this scheme won't benefit the very poorest, elderly people eking out a life on the breadline.

You don't have to be very wealthy to benefit from these bonds, but you obviously do have to have some cash to save into them – a minimum of £500. That means that the poorest 1.8million over-65s living in poverty will see no benefit from these bonds, despite the massive cost to the taxpayer.

And let's put the cost of them into context; £300 million would pay for 13,636 entry level NHS nurses.

Calculate your pension income options

It's hugely unfair to the next generations

I can't blame the pensioners who have bought these bonds; the Bank of England's base rate decision has kept the returns on their savings painfully low – and it has done so partly to help mortgage holders like me afford our homes.

And I don't doubt that many of the people benefitting from the bonds are hard-working savers who did the right thing and put money aside but are finding the low returns hard to live on. I don't doubt that many of them are struggling.

But as a group, these people have far more generous pensions than the future retirees can dream of. They have seen their homes multiply in value at the expense of subsequent buyers.

Now they are to enjoy a financial benefit that's not available to the rest of the UK and which will be funded by taxpayers who are already struggling with state cuts, large mortgage debts, and the likelihood of much later and poorer retirements than these lucky beneficiaries of the current scheme.

It stinks and the electorate should remember the whiff when they enter the polling booths this year.

What do you think? Is it right that pensioners should benefit or are they simply being wooed before the election? Have your say using the comments below.

7 ways to improve your retirement
See Gallery
Why I think pensioner bonds stink

If, like many Britons, you have failed to save the cash you need to maintain a comfortable standard of living in retirement, one option is to sell your home and downsize to a smaller property, using the money leftover to cover your living costs.
If moving out of the family home is too much of a wrench, however, the good news is that equity release schemes allow you to stay in your house or flat while still using the equity built up in it to provide some extra cash. The downside of the schemes, which work a bit like mortgages, is that you may not have much left to pass on to any children or other relatives.
But that's a small price to pay for a reasonable standard of living. For more information, try Age UK on 0800 169 6565.

Choosing the right annuity can have a significant impact on your retirement income. And as with most pensions, you automatically have what's called an 'open-market option' (OMO), you can scour the market for the highest annuity rate.
It is worth checking what your pension provider is offering first, though, as some companies offer guaranteed rates for existing customers that are likely to beat those available elsewhere. The Pensions Advisory Service on 0300 123 1047 is a good place to get some free advice.

On retirement, most people convert their pension fund into a guaranteed income annuity that pays out the same amount every month for the rest of their lives.
However, you can also choose an increasing annuity that pays out smaller amounts in the first few years but offers larger payments further down the line. This may prove a wise move if the rate of inflation remains at over 2%.

It is now easier to work later in life because the "default retirement age" has been scrapped.
People approaching retirement age and worrying about money can therefore choose to work for a few years longer - potentially transforming their financial situation. Other than the extra income from working, these people can look forward to higher state pensions, and higher annuity rates due to their greater age.
They can also benefit from bigger tax allowances and the fact that they no longer have to pay National Insurance contributions. Check out this nidirect website for more details.

You could get a much better rate with an impaired-life annuity if you have a medical condition that is likely to reduce your life expectancy.
Incredibly, even snoring, which is a common symptom of Sleep Apnoea could have an impact.
According to figures from MGM Advantage, a man with this condition could receive an extra £12,000 retirement income over the course of their retirement - or £571.44 extra money each year. Click here to find out more.

To maximise your retirement income, it is vital to ensure that you are receiving all the benefits to which you are entitled. These include the basic State Pension, and in some cases, the additional State Pension.
If you are on a low income, you could also qualify for the guaranteed element of Pension Credit, while those with some savings may get the savings element of this benefit. For more information about these and other benefits such as the Winter Fuel Payment, click here.

Many older couples rely on the pension income of one person - often the man. Should that person die first, the other person can therefore be left in a difficult position financially.
One way to prevent financial hardship for the surviving person is to take out a joint life annuity that will continue to pay out up to 67% of the original payments to the surviving partner should one of them die.
The disadvantage of this approach, however, is that the rate you receive will be lower. Again, the Pensions Advisory Service on 0845 601 2923 is a useful first port of call if you are unsure what to do.


Read more on AOL Money:

Sales of pensioners bonds extended by three months

Why pensioners bonds don't go far enough

Will you really be better off in 2015?
George Osborne: Pensioners to Get Free Independent Advice
Read Full Story