The system has worked for Boomers at every stage of their lives

Lucy Burton’s powerful article last week on the wealth of many of our pensioners was absolutely right. Their incomes are higher. Their wealth is greater. The state is being reshaped around services and payments for them.

Many pensioners challenge her by saying that what they get now is a fair return after they have paid in during their working lives. The welfare state should indeed offer a fair deal – we make payments while we are working and take out when we are in need.

That is the theory but in practice the system is not fair across the generations. We can estimate how much people put in overall during their working lives as against how much they will take out from the welfare state. It looks as if there is a lucky generation of Boomers born after the war who are taking out 25pc more than they put in. Younger generations will still gain a bit – if the economy grows we can all share in the benefit as we get older – but they will be lucky if they get a 10pc return.

When today’s older people were young there was more spending on benefits and services for families and the basic pension was just linked to prices. Now this generation is older, family benefits are cut and instead pensions increase by the triple lock. Benefits for families fell by £375 below inflation year in the decade up to Covid whereas benefits for pensioners rose by £510 on top of inflation.

The system has worked for the Boomers at every stage of their lives because Boomers are a big politically powerful generation – after all this is the generation choosing the next Prime Minister. And as this large generation grows old that increases pressures for more spending on pensions and the health service. It is hard to see any Government resisting those demographic pressures so we have to expect older people to help fund this growth in the welfare state through the taxes they pay – it is absurd that they don’t pay National Insurance on their earnings for example.

It is a very similar story for company pensions. The original company pension promise depended on the performance of investments. But then all the political parties voted for policies to make company pensions worth much more with some inflation protection and rights for early leavers and spouses. Those are nice things to have. But overall they made company pensions more expensive and companies responded by closing them to new members – they became a once-off special offer for the post-war generation. Now young people are working hard to generate the revenues to plug deficits in their employer’s company scheme that they themselves are not allowed to join.

The Boomers have done well on housing too. Lots of houses were built after the war and then council house sales spread home ownership. But there has been no similar effort to provide houses for the younger generation and they have much higher housing costs as a result. Moreover as private rented accommodation is smaller they occupy physically less living space than young adults used to.

It is this combination of state pensions and company pensions and housing which has pushed the incomes of the typical pensioners after housing costs up above the typical family. There are of course poor pensioners as well to whom we have a particular obligation but even the poorest 20pc of pensioners have higher living standards than the poorest 20pc of working age families.

The living standards of many younger people have not increased since the financial crash of 2008. And that is not because they are living extravagantly – above all it is older people who are eating out and travelling more. House prices have not gone up just because homeowners scrimped and saved to build a conservatory. It is also because national policies from tough planning rules to quantitative easing have caused assets to shoot up in value relative to national income and most of those assets belong to older people.

The good news is that we do all care for other generations. Young people want granny to live comfortably. And many parents and grandparents worry whether the younger generation are going to have the same opportunities in life we have enjoyed and want to see better chances for them. We are all in this together.

If there are to be tough decisions on public spending we cannot exempt spending on older people when it is such a big part of the total. The budget for pensions is over £110bn. Spending on benefits for unemployed people by contrast is a tenth of that. Pensions should be linked to earnings, though, with immediate protection against price increases when inflation is higher than earnings recouped when earnings catch up.

The pension age needs to carry on rising and we need a renewed effort to help get the over-fifties back into work. And it is right to expect older people to make a contribution to their care costs – with more use of a charge on the estate after their death. Council tax falls much more heavily on younger people living in low value properties than on older people in houses worth much more – it should be made fairer.

We should boost ownership amongst younger people. Build more houses. Ease mortgage regulation. Boost the money going into their very modest auto-enrolled pensions. If we don’t do anything about this then younger generations may lose patience and see the Tory Party as the political party that represents older people not them. They will wonder why the Party which talks about the property owning democracy is incapable of delivering it for them.

This article was originally published in The Telegraph