Pensioner bond bonanza shows expediency is everything

Ashley Wassall

In modern politics, you can tell whether or not we are hurtling towards an election by the smiles on pensioners’ faces.

Older voters typically turn out in higher numbers than their younger peers. More than three-quarters of over-65s made their way to the polling stations last time out, making up significantly more than a third of the electorate.

As such, when the plebiscite looms, pensioners are showered with handouts to ‘encourage’ them to put their ‘X’ in a particular box.

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So it was in 2010, when all three parties acknowledged the need for deep cuts and the focus fell on the net claimants in society, yet there were across the board promises to increase the largest portion of the benefits bill, the state pension, by at least the highest rate of inflation - if not more - through the ‘triple lock’.

Universal benefits for even the richest elderly citizens were similarly guaranteed.

At a time when the public spending scythe is set to be swung more ferociously than ever - by some measures 60 per cent of austerity is still to come - the ‘triple lock’ pledge has been renewed. Pensions will go up by at least 2.5 per cent, five times the current 0.5 per cent consumer price index rate. Universal benefits are less secure, but are still currently off the table in savings discussions.

And now we have pensioner bonds. The £10bn bonanza which saw the government put £325m to subsidise market-smashing saving rates for over-65s has been hugely popular with older folk, and has just been extended by the chancellor until after the election.

Now the government believes £15bn will be allocated, taking the cost up towards £500m. The investment earns 2.8 per cent on the one-year fixed rate and 4 per cent on the three-year alternative; the market leading rates for the rest of us are 2 per cent and 2.7 per cent.

Everyone knows the government are buying votes with this one: some see it as an inevitable consequence of younger people affecting disaffection and not bothering to vote; others as a pitiable failure to govern for the good of all. I sit in the latter camp, with a bit of my esteemed fellow FTAdviser columnist Jeff Prestridge’s goodwill for the proposition thrown in.

I’m glad pensioners are able to put £10,000 into a product that will give them a decent boost after a long period of poor rates, but I get increasingly exasperated that the penury faced by everyone else is seen as unimportant.

I suspect this problem won’t right itself until voting habits change - and if I were a pensioner or advising one I’d be jumping on this offer and contributing to the website crashes.

But I’m not. Which means I won’t be smiling much in the lead up to the election, and noone will much care.