Why I think pensioner bonds stink

Taxpayers are effectively subsidising the Tory's election campaign by £300m...

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.

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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.

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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.

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