There is a gulf in generational understanding over the state pension

The generation warriors are back, riding their high horses into battle against – guess what? An inflation-linked rise in the state pension. After a year in abeyance, Downing Street and the Treasury have confirmed that the so-called “triple lock” will return, giving the UK’s over-66s (otherwise known as cosseted boomers) a 10 per cent rise in their state pension from next April.

Within minutes, the complaints were raining in from all over the political shop. The left charged that the announcement was a government ploy to win (pensioners’) votes in the week of two potentially tricky by-elections. How could ministers warn “hard-working people” not to make pay demands that would inevitably stoke inflation, when pensioners were going to be fully compensated?

Particularly scathing, however, were commentators from the right. A certain Sam Ashworth-Hayes accused “British politicians” – he clearly could not stomach the reality that they were in fact Conservative politicians – “of once again turning round to mug the young to pay the old”. For The Spectator, Kate Andrews claimed that even as the “the working population’s salary rises fall behind the pace of inflation, pensioners will storm ahead with... a huge boost to their purchasing power in this high-price economy.”

Storm ahead? Really? On an income that will, even if increased by a full 10 per cent, barely top £10,000 a year? The peers were not far behind in their indignation. The economist and Labour Party adviser Jim O’Neill told the BBC he had “no idea” why the “triple lock” was being restored. He found “the constant protection” of pensioners “ludicrous”. On the (soft) right, Lord (Ken) Clarke, also on the BBC, told the government to “stop giving me money... it’s absurd. I’ve got two houses, I don’t need it.”

And I am quite sure he doesn’t need it. Lord O’Neill, by the way, formerly of Goldman Sachs, doesn’t need it either. Nor do any of those usually invited by the BBC and other outlets to lay into any supposed government generosity towards our older citizens. Step forward (Baroness) Joan Bakewell, (Dame) Esther Rantzen and (Sir) Max Hastings, with their special pleading for the generations to come.

A standard media discussion includes, on the one hand, an “angel” nurse from the NHS in her 20s who complains she cannot make ends meet, let alone “get on the housing ladder”, ever; on the other hand, one of the superannuated wealth class named above, and a hapless minister. This week, those on call included the work and pensions secretary Therese Coffey herself – trying to defend what was by then already branded a socially unjustified transfer from hard-grafting young to leisured-class old. Oh, and while we’re (not) on the subject, these space-hoggers stubbornly refuse to downsize, to free their enormous homes for deserving young families.

If you are lucky, you might catch the former pensions minister and campaigner Baroness Ros Altmann. But where, you might ask, indeed you should ask, are any of the real-life pensioners for whom the state pension – and not necessarily the full state pension either – is their only means of support? How often are any of them invited to take the microphone?

But they need to be heard, because – it seems to me – there is a gulf in generational understanding that opens up whenever the state pension hoves into view.

The first problem stems from ignorance of how modest (inadequate) the UK state pension actually is. At £179 a week, or £9,308 a year, it is among the lowest in the developed world, and the total income that around 30 per cent of the country’s 12.4 million state pension recipients have to live on. Not only that, but the state pension is almost the last contributory benefit left in the UK, so not everyone receives the full amount. These figures need to be repeated whenever the state pension is mentioned, but for some reason they rarely are.

The UK state pension is not only modest in itself, but in comparison with equivalents in other countries, it is even more modest relatively than it might appear. The UK was among the first to equalise the pensionable age between men and women and has now raised the qualifying age for all to 66, which has led in turn – as a study published last week showed – to a rise in poverty among those who left work for whatever reason before qualifying for their pension.

Another misconception is the supposedly huge burden that pensions place on the Treasury – a bill, we are constantly reminded, paid by working-age taxpayers. In fact, the UK state pension is not only among the lowest in the developed world for its beneficiaries, it is also among the lowest in its cost to the Exchequer (4.5 per cent, compared with 6.5 per cent Organisation for Economic Co-operation and Development (OECD) average).

To keep up to speed with all the latest opinions and comment sign up to our free weekly Voices Dispatches newsletter by clicking here

Also, although some seem to believe that pensions are tax-free, they are not. Anyone with additional income (and this clearly includes Lord Clarke and his colleagues on the red benches) will be subject to tax. Any time it raises the state pension, therefore, the Treasury will recoup a substantial portion of its outlay.

The last – surprisingly widespread – misconception is that the “triple-lock” inflation-proofing applies to pensions overall. Would that this were so, I can hear everyone who is trying to live off their pension income sighing. It applies only to the state pension (currently £179 a week, remember) and only from next April. The value of most (private and company) pensions relates not to inflation, but to the vagaries of the stock market.

This is why public-sector pensions – most of which not only relate to a person’s final salary, but are inflation-proofed to boot – remain such an enviable asset and should be factored into any comparisons of pay in the private and public sectors.

This may also be one reason why, I hazard, the very mention of the state pension triggers such resentment among so many of the young. Not only do they have little idea of just how modest the state pension is and how relatively cheap any increase is for the Treasury, given that it is taxed, they also have quite a misleading idea of how most people’s retirement finances stack up, based perhaps on the pleasant lives they see being led by their parents or grandparents in retirement.

The distortion here stems in part from changes in pension provision over the years – final salary pensions continue for a favoured few, and the public sector distinction powers on – which make inequalities in retirement as stark as they are in the real world – only worse.

Why worse? Because, dear young, working-age taxpayer, there is a crucial difference between you and today’s pensioners. Prices and interest rates may rise – as they did in our time, too – and you might not be able to afford to buy a house yet (though you will, because this is a market). But you have the one thing that people on a fixed income with their working lives behind them do not, and that is time – time to improve your lot.