The war on pensioners

The average pensioner still has an income 25 per cent below the average worker. You wouldn’t guess that from the media

14 November 2015

9:00 AM

14 November 2015

9:00 AM

Who controls the media in Britain? Depending on your political outlook, you might answer: the Conservatives, the liberal-left chattering classes, Rupert Murdoch or the BBC. But if the coverage of the elderly is anything to go by, then we can perhaps agree on one thing: the headlines are decided by a cohort of 25- to 45-year-olds who believe that other people’s parents and grandparents — a.k.a. Britain’s pensioners — have stolen their future, dashed their dreams and nabbed all the plush property.

How else to account for a headline such as ‘No pay rise? Blame the baby-boomers’ gilded pension pots’ and a plethora of articles maintaining that pensioners have ‘never had it so good’, at the expense of the young, who will be ‘boomeranging’ back to their childhood beds, too poor to buy a home until they are in their own straitened dotage. The source for one recent wave of generational alarmism was a report published by the Resolution Foundation, a generally laudable outfit which focuses on low incomes.

The Resolution Foundation has a new boss: David Willetts, a former Tory minister and a pioneer of generational jihad. Five years ago he wrote the set text on the subject, The Pinch, subtitled ‘How the baby-boomers took their children’s future — and why they should give it back’. Thankfully, he made little headway selling this argument to the Prime Minister and Chancellor, but his thesis suits his new thinktank, which has not been averse to a little granny-bashing.

But this was as nothing compared to the headlines generated by a recent report from that fount of economic truth, the Institute for Fiscal Studies, and a lecture by its director, Paul Johnson. Here is a taste: ‘Pensioners earning more than the average worker’ (Independent); ‘Why pensioners are probably earning more than you are’ (City AM); ‘Pensioners have more cash than those in work’ (Times). Again, we are invited to believe — in effect — that the young are broke because the old are rich.

The report argues that the increase in average pensioners’ incomes since the crash has outstripped the increase in the income of working households — ergo, pensioners have been unfairly protected. It was the latest restatement of a familiar theme: Britain is now a gerontocracy, with the government shamelessly favouring the old over the young.

But this is only part — and a very partial part — of the story. While pensioners’ income has risen more than that of workers, it rose from a much lower base. There is still a gap of around 25 per cent between the average worker’s income (£28,000 a year) and that of the average pensioner (£21,000). The UK state pension languishes far below that provided in most developed countries, and it is all that many pensioners have to live on.

Some of the media reports got around those awkward facts by talking about ‘net’ income. Pensioners were deemed to be better off (even described in some reports as ‘earning more’) than the average worker because they were assumed to have lower outgoings, notably on housing costs and dependants.

This argument is bogus in almost every respect. Even if most of those receiving pensions own their own homes, this does not relieve them of housing costs. They may no longer be paying a mortgage (at a time, by the way, when interest rates are the lowest they have been for more than a generation) but they still face maintenance bills on properties that are often older and more expensive to keep up than more recently built housing.

Those living in flats or private sheltered housing face service charges that have a habit of rising out of all proportion to the general level of inflation. And all this has to be paid out of incomes that are fixed — or, for fortunate ex-public sector employees, linked to what is currently a negligible rate of inflation.

Even if supermarket bills are falling because of greater competition, food and other costs tend to be higher for smaller households. Plus older people need services such as cleaning and care, which have to be paid for out of taxed income. Pensioners pay tax like anyone else. The NHS may be ‘free’, but declining faculties incur a host of other expenses, and means-testing excludes practically every homeowner, and a good many others, from council provision. The promised ‘cap’ on care costs has been postponed. How exactly are pensioners privileged?

Ah yes, the ‘triple lock’ — whose abolition is increasingly demanded by a vocal younger generation that regards it as an unaffordable luxury. This promise — that the state pension will rise every year in line with prices or wages or by 2.5 per cent, whichever is highest — sounds reassuring. But with inflation around zero, these rises go nowhere near compensating the retired for the dismal interest rates on their savings. The same applies to the annuities they were forced to take out (until this year, when some could supposedly opt for a Lamborghini instead).

If anyone deserves to feel aggrieved about the fallout from the financial crisis, it is not the young — who can still live on absurdly cheap credit. It is those who prudently saved for their retirement, only to face interest rates turning negative. And those same mollycoddled young have the nerve to resent the ‘triple lock’, which may limit some of the damage when inflation starts to turn up.

Most misleading and most pernicious in public relations terms, however, is the way in which the state pension is lumped together for government statistical and administrative purposes with benefits. A typical newspaper report will challenge the reader to estimate the biggest benefits charge on the public purse — teasing readers to say jobseekers’ allowance, or housing, or some such — only to floor them with the fact that it is none of these ne’er-do-wells who are squandering public money, but your granny and grandad.

The state pension, they will say triumphantly, accounts for one third — and rising — of all welfare spending. Add public service pensions and other pensioner benefits, such as disability and (a tiny fraction) winter fuel, and practically half of welfare spending is on pensioners. Cue fury among the young, who erroneously conclude that they are paying.

The state pension is one of the last truly contributory payments. To present it as just another handout and part of a ballooning benefits bill is an invitation to the young to resent the amount spent even more — and to the recipients to feel that they are being patronised. The state pension should be separated from the overall benefits bill forthwith.

There are rich pensioners, as there have always been, and there are many more who, thank goodness, are less impoverished in retirement than their parents were. To infer from a general improvement, however, that your average pensioner today is in clover, compared with their unjustly cash-strapped heirs, is a travesty that quite dishonestly stokes the fires of generational strife.

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  • blandings

    I will cut the little wretches out of my will and leave my vast accumulation of wealth to a charity for distressed donkeys.
    Well, I was alwayd going to, but now I won’t feel guilty about it.

  • IainRMuir

    People of my generation had some very strange ideas when they were young. They had this concept called “saving up”, whereby you did without certain things (yes, I know) in order to be able to afford more important things like deposits on flats.

    When did you last see a young person driving a banger?

    I want it and I want it now!

    • KingEric

      Very true. On top of that, they live a far more gilded lifestyle than we ever did with their smart phones, cheap flights, designer clothes and ability to source anything with a few pressing of buttons from the internet. The miserable wretches don’t have a clue.

      • IainRMuir

        There were people like this several decades ago and, surprise surprise, they couldn’t afford to buy a house or flat either. The main difference, I think, is that back then they were openly regarded as feckless.

        • Mary Ann

          Back then if you couldn’t afford to buy you applied for and got a council flat.

          • commenteer

            Are we talking about the 1990s here, Mary? In London council flats have been restricted to the homeless, single mothers, etc., since 1973. I’m not sure ‘just applied’ was ever true.

          • dc

            there IS a country outside london.

        • dc

          they’ve been ‘conned’ by the real powers that be into spending everything they’ve got, and strapping up to the hilt with ever growing debt.
          but on the brightside, you have just got THAT phone your best friend would have liked to have purchased first, still, onward and downward.

  • Clive

    I don’t even think it is ‘the young’ who are doing this. I believe it’s their parents who are trying to offload the cost of their own fecklessness on to the taxpayer.

    They were paid to have the baby in the first place. Making babies has probably been subsidised more than any other human activity, certainly in the UK.

    Unfortunately, they don’t seem to have been able to see more than 10 minutes into the future and when the little, er, person started costing them serious money as a lot of television and other ads told the offspring that they were entitled to the latest of every kind of technology, these parents screamed blue murder to be subsidised yet again.

    …And a lot of them seem to work in the media.

  • nana

    The Head of IEA was attacking the state pensions this week.it’s constant attacks by journalists,and talking heads.if they attacked other groups it would be classified as hate speech.well i have stopped buying the newspapers who attack the elderly at every opportunity.the talking heads of both right,and left are unelected.but no one talks about muggings,rapes etc on pensioners.the 87 year old punched in the face on a bus.aided by another pensioner.2015 in the UK pensioners are treated as ‘scroungers’,and second class citizens.shameful

  • commenteer

    It’s to distract attention from the cost (in every sense) of immigrants.

    • Shazza

      Spot on. The same with the NHS, always blaming the old folk. Of course, it has nothing to do with immigration. Next thing it will be the fault of the old for the pressure on schools (wait until we are told that they should not have had so many grandchildren), transport – and of course, why should they be allowed to continue living in their houses that they saved and scrimped for to pay off? So selfish………..those old white folk.

    • Mary Ann

      Without immigration there won’t be enough people to pay for your pension.

      • commenteer

        Really? Have you looked at current population projections, even without further immigration?

      • uberwest

        Only the most witless liberal imbecile would believe that. Actually immigrants are disproportionately likely both to be unemployed and, where employed, tax sinks rather than sources. Anyway, Switzerland, with its population of 8 million is far richer and more prosperous (per head) than India, with its population of 1 billion plus, so it’s not about mere numbers anyway.

      • Philsopinion

        An oft mentioned lie that was disproven years ago by the Turner Report.

        Fact: Between 1995 and 2010, non EU immigrants cost the country £120billion more than they paid in. And that’s before we factor in all the other costs and inefficiencies of your anti-democratic ideology.

    • RobertDeLuce

      Racist nonsense.

      • Philsopinion

        There is nothing racist in that comment. Your attempts to close debate down with that accusation don’t work anymore.

  • Sandy

    “But this is only part — and a very partial part — of the story” as opposed to what, an entire part??

    What is missing from your otherwise quite fair article is mention of the immense fraud perpetrated by the UK government against UK citizens, mostly those of the older generations.

    Calling the state pension ‘contributory’ is fair, most pensioners will claim they have paid in all their lives and so are entitled to their pensions. This implies government collected those (mandatory) contributions and set them aside, carefully investing them to provide for their beneficiaries’ retirement. But they didn’t. They spent them. If this happened in the private sector, which it has, those responsible would be find guilty of fraud, convicted and jailed, which they were.

    The same is true for public sector pensions. Payment taken from employees and pissed up the wall by successive chancellors. Again, outright fraud.

    Now the Government has to find £150Bn (20% of the budget, more than any other expense including health, actual welfare, defence, education…) a year from taxes to pay these liabilities to recipients who thought they had already paid for them. It isn’t inter-generational theft, it is theft from citizens by the government.

    And what is the government’s answer to righting this historical wrong? Foisting this multicoloured furry *monster* on us: https://www.gov.uk/government/

    I propose, at the very least that ‘Workie’ be put on trial for these crimes. And possibly shot.

  • protempore

    Thank you Mary, your article nails it but the truth never makes for sensational headlines and this Tory government is determined to drive a wedge between the young and seniors. Of course the biggest fraud of all by the government is aimed at just 4% of state pensioners, they do not get any cost of living increases at all, no triple lock for them. Their crime? To retire to the wrong place……for many who decided to join their family in, mostly Commonwealth countries, and a few other destinations have their pensions frozen. This is something the DWP do not talk about and was never mentioned whilst they take mandatory contributions from those affected. Each pensioner not living in the UK saves the UK economy about 4,000 pounds a year and there are 1.1 million of them of which the majority get yearly index linked increases but the rest get nothing, an outrageous and blatantly discriminatory scandal. And for decades the UK government has got away with doing this….shame on them.

  • Andy Robertson-Fox

    An excellent article setting out the facts on the subject following rather too many media stories blaming the so called baby boomers. Media stories that happily overlook the real austerity of war time and the post war years with rationing and shortages. Happily overlooking the years of inflation in the 20% plus range, of double digit interest rates, mortgages and no houses and then vice versa, wage increases paid in phases through the year, a £70 limit on takıng money abroad, for the few who could afford holidays abroad….oh, I could go on!
    And we still made our NI contributions on the same Paygo system that operates today so that our parents and grandparents received the State Pension.

    I see that protempore’ comment has rightly highlighted the plight of the frozen pensioner and which, in Section 20 of the 2014 Pension Act, will affect people retirıng overseas after April 2015 in the same way as it does today.
    Of course that ıs not all the Webb legacy has left, is it?
    Not only has the entitlement of a widowed spouse to receive a pension based on the late partner’s NI contributions been scrapped but the allowance for a dependant spouse has been withdrawn for those claiming the pension after April 2010 but for those who became entitled to their pension and such an allowance prior to that date it is being withdrawn as of April 2020 – in effect after 2020 an ageing retired couple face a real cut and being told to live on the NI contrıbutor’s pension only. Of course, as with the frozen pension scandal, the DWP do not advise those likely to be affected and such Heath Robinson schemes serve only to torpedo the planning and budgetting of many a couple who have been exhorted by government to do just that…plan and budget your retirement.

  • Teacher

    I have been asked several times lately if I am thinking of ‘downsizing’ since I have retired early, live in a detached house and one of my two children has moved out. I feel that this impertinence has been enabled by the granny-bashing fuelled by Willetts’ book and the sense of angry entitlement fuelled in the young by the left. I know of several peers who have looked into downsizing their houses and it is not at all sensible as fees and taxes eat the profit and you sell a four bedded house to end up with a three bedder and no equity. The retirement home bought with the proceeds of the sale then eats into a fixed income with ever rising service charges and costs.

    But that is besides the point. If you buy anything legally and out of taxed income it is yours to keep with no questions asked. I don’t ask the young if they need an i-Phone at a cost of £600 and a monthly contract or a mini break for a grand. If they want to waste their hard earned dosh on unappreciating assets that’s their affair. However, neither are they entitled to question me about my purchase and my quiet enjoyment of a place to live.

    It’s all nonsense anyway. My daughter and her partner had to give up their rented London flat as it was too expensive and they realised that paying a fortune to a landlord was throwing good money after bad. They have taken out a mortgage on a house in the suburbs. The difference between them and others in their age group is that they both came from prudent families and had saved a deposit, besides being creditworthy and having foregone holidays and luxuries to secure a home. Yes, they have good degrees and, therefore, good jobs; yes they had sympathetic and helpful parents; yes, they, too, had to search for a whole year to find something affordable but they show what can be done if self restraint, intelligence, persistence and effort are employed. They tell us now that their friends are envious and call them ‘lucky.’

  • green hackle

    The one big problem with the Youth is they never think that one day they will be a pensioners, some of us have worked hard all our lives to Have what we Have now, And have no one to Thank or be ashamed of, We Dont Owe anybody anything, We have paid our Dues to be Old..

    • whorya

      And “created” that same youth. Ungrateful tossers.

  • Graham Button

    The trouble with todays youngsters is that they think they have a god given right to own a property in the area in which they grew up. Fifty years ago I had to move over forty miles away from my parents to enable me to afford a home. It was accepted as par for the course in those days, get over it and get on with life.

    • whorya

      God given right, sounds a bit Jewish for wanting property. (just came out)

  • whorya

    What people fear to realize, Is that successive governments have done, is steal the present day pensioners NI contributions, that where meant to fund the NHS and their pensions, to fund Illegal wars, and the EUs 53mill per day. So now our present day tax payers are funding pensioners, because of the governments “theft” of these contributions. And on going. The government are now in the process of getting a bill through parliament, to amalgamate NI into PAYE. So they can “legally” steal your pension money and use it for a failed EU. And fund all these immigrants….

    • Andy Robertson-Fox

      The NI Scheme has always been Pay As You Go in that the contributions made by the current working generation has funded the state retirement pensions of the previous generation. The contributions were never invested by the government as would be the case in employer pension schemes and that was never the intention.
      The NI Fund is separate from General Taxation and, as of 31st October 2015, has a ring fenced surplus of £21.8 billion.
      The idea of bringing the NI contribution more closely in line with PAYE ın an Earnıngs Tax has been under discussion for many years and The Office for Tax Simplification is again looking at the possibilities – there are many difficulties as, for example, NI contributions can be voluntary but tax cannot, not all NI contributors have a tax liability, IT incompatability – and is expected to be able to report its findings in 2016. There is no bill in parliament at present on this subject.

      • whorya

        NI. Is not a “tax” PAYE is. I still maintain, that NI contributions have been misused, for other economic uses..

        • Andy Robertson-Fox

          I think if you read my comment more closely you will apprecıate that I did not say NI was a tax – indeed I pointed out that NI contributions could be made voluntarily – as do many who work and/or live overseas and wish to protect their UK state pension rıghts.
          As regards the surplus in the NI Fund it can only be spent on the specified pensions, benefits and allowances. It is held by the DMO and may be borrowed by government to finance new projects connected to the infrastructure; ıt cannot be used to subsidise existing programmes. The surplus remains the property of the NI Fund and the government pays interest accordingly.
          The surplus, at one time around £50 billion, decreased in recent years as claims exceeded income; ıt has shown a slight increase again to ıts current level in recent months.
          If there is any “misuse” it is in not using the surplus to pay the index linking to frozen pensioners who contributed during their working lives like everyone else.

          • whorya

            Andy how can there be a surplus when pensioners are living longer?. so Government should keep that money invested for the long term. And not “tax” todays taxpayers to cover their misuse of their money. whereby present day tax payers, would have more useable money to put back into the economy.

          • Andy Robertson-Fox

            Quite simply because in previous years, when the surplus was increasing to around £50 billion it was a matter of income exceeding expenditure. More recently that position has reversed and it fell to close on the one sixth of annual expenditure that GAD recommend is held in the NI Fund in reserve. GAD calculates the anticipated required income for each year and that takes into account an increasing pension population. It is for government to determıne whether an adjustment of the NI rate is needed; I believe the last government announced that in line with the new single tier coming into operation in April 2016 the required NI contribution for both employer and employee would be increased.

    • Bonkim

      That is the way the system operates. We don’t have an investment linked pension, health and social service where what you get depends on what you paid – that way many will be destitute in old age. The present system makes sure no one is left behind regardless of past income or NI payments.

  • Governments have long run giant Ponzi schemes sucking up taxes and NI contributions which have taken the lion’s share of my lifetime income on the promise of free health care and pensions as long as you live. This money was all spent in paying out to current recipients while I was young and middle aged and pouring large amounts of my salary into the scheme. Like all Ponzi schemes, it held no fund, but paid it out as fast as it came in. This worked until Labour upped the payouts by massively hiked ‘in work’ benefits which sent deficit spending skywards. Not helped by the wholesale abandonment of smoking – the great friend of generations of chancellors since it killed off most of its addicts five or six years into their pensions, and not helped by the post 1970 collapse in women’s enthusiasm to pop out two or three babies and bring them up. These trends boosted long term costs of looking after the people who had paid in for forty or fifty years and left a dearth of new mugs to con into joining the Pnzi game – not that anyone had a choice about joining in – it was compulsory.

    It was the left that encouraged boosted in work benefits (bread and circuses) and also encouraged women to work (boosts GDP growth but stifles their enthusiasm to be mothers to more than the odd sprog. Of course the Left’s other game changer was to fill the country with south Asian migrants who breed like rabbits, so maybe they will save the big Ponzi scheme for a while, until it is either declared un-Islamic, or finally implodes when the new massive population of children come to their turn to be paid for.

  • Bonkim

    To be fair, Pensioners don’t need as much as a young couple paying high rent or mortgage, bringing up children and just starting on a new career. Usually pensioners have completed their working life and discharged their responsibilities to society. Most have paid off their mortgages and have new freedoms – so don’t feel too sorry for pensioners even if on average they earn much less than the economically active.

    • Andy Robertson-Fox

      To be fair pensioners don’t get as much as young people but nothing has changed because the pensioner of today is the young person of yesterday and yesterday’s chıldren met sımılar problems as those of today….and most worked to overcome those problems adjusting their lifestyle within their income.
      I posted about five days ago the sort of problems today’s pensioner had to deal with and don’t propose to reiterate them here. Yes, I feel sorry for the young people of today but no more so than I did for those of the previous generation and I have sympathy with the pensioners who are trying to live on one of the poorest State pensions in Europe. Furthermore, I have even more sympathy for the frozen pensioner who contributed to the NI scheme on the same terms and conditions as everyone else during their working lives but who get no index linking, ever, and for the 93 year old who is trying to survive on a “full pension” of just £39.50 per week.

      • Bonkim

        agree with most of what you say – if you are hungry you run to get a job, become adaptive, change, learn and get on in life.

        Regards poor pensions – don’t forget universal social security, health, and pensions were introduced post WW2 and previous generations coped – there was more interdependency and help/support whereas today we are dependent on Nanny-state for everything in life.

        Regards frozen pensions – yes – but only for those that choose to live away from the U.K. Those in the UK regardless of past NI payments would get various support allowances if in hardship.