Robbing pensioners to pay millennials

Should we get rid of generous perks for pensioners to fund more support for cash-strapped young people? The House of Lords' committee on inter-generational fairness says policies like the triple-lock guarantee on state pensions, free TV licences and bus passes for pensioners, and even the winter fuel allowance may have had their day.

The argument is that as pensioners have seen their incomes rise more quickly than other groups over the past ten years, it now makes sense to prioritise younger generations. Savings could, for example, be ploughed into affordable housing.

So what would pensioners be missing out on? Well, analysis from the House of Commons Library in the run-up to the 2017 General Election, when Theresa May floated the idea of dumping the triple lock, suggested it would cost a pensioner with the full state pension £817 over the next five years.

Subscribe to MoneyWeek

Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Get 6 issues free

Sign up to Money Morning

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Sign up

That assumed pension benefits would simply be increased in line with inflation forecasts at the time, rather than the highest of inflation, earnings growth or 2.5%, as the triple lock promises. In addition, the winter fuel allowance is £200 per year for most pensioner households, while free TV licences are currently worth £154.50 a year.

Of course, the flipside to the these costs is the potential savings for taxpayers. The Institute for Fiscal Studies puts the net gain from abolishing the triple lock at around £4bn a year. Add in another £745m for free TV licences for the over-75s if they were scrapped the BBC currently picks up this cost plus the £2bn-£3bn cost of the winter fuel allowance, and significant sums on bus passes, and the savings begin to look very significant. It may come down to whose votes the government covets more.