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25 Oct 2020

Should the older generation help to pay the coronavirus bill?

The pandemic has intensified the debate around intergenerational fairness and the future of pensioner 'perks'

New research from Which? Money has revealed that although the older generation is worried about the financial impact of coronavirus on younger people, they feel that they shouldn't have to foot the bill.

The financial challenges facing younger people, and the huge bill facing the government as a result of the pandemic, have intensified the debate around intergenerational fairness and the future of pensioner perks.

While many retirees would argue that these have been earned through decades of paying tax and National Insurance (NI), others question the sustainability of such benefits and whether this substantial spending should be redirected.

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The intergenerational fairness debate

There are concerns that younger people's prospects are worse than they were for older generations, who are perceived to have benefited from free access to university education, generous private pensions and lower housing costs.

Age-related benefits - such as the guaranteed state pension increase and the Winter Fuel Payment - have also contributed to the rise in pensioner incomes.

But some argue that these should be reviewed in the name of intergenerational fairness and to help the government balance the books in the wake of the pandemic.

Replacing the state pension triple lock with a 'double lock' would save £20bn over five years, the Social Market Foundation estimates.

Meanwhile, removing the Winter Fuel Payment and the free bus pass in England would free up around £3bn.

Don't take our benefits

In July 2019, and again in July 2020, we asked Which? members to share their views on whether certain retirement or age-related benefits should be available to all, means-tested or scrapped altogether. Our sample comprised mostly retirees (85%).

Of the four perks we asked about, the proportion of people who think they should be abolished has gone down in the wake of coronavirus.

We found that 54% of survey respondents believe TV licences should be free for all over-75s (up from 48% in 2019). Another 42% feel that it should be means-tested, which is effectively what happens now, as over-75s who receive pension credit remain exempt from paying.

The Winter Fuel Payment divides opinion: while 43% of respondents believe that it should remain universal for those past state pension age (an increase from 40% in 2019), a small majority (53%) would be happy to see it given only to those who need it most.

However, 82% of Which? members said that free prescriptions and eye tests should remain for all above a certain age. Similarly, 71% want free bus passes to stay.

NHS prescriptions are free for all ages in Northern Ireland, Scotland and Wales. Free eye tests are also available to all in Scotland.

Listen: Our experts discuss paying the costs of COVID-19 on the Which Money Podcast.

Looking after the younger generation

The fact that retirees we spoke to are generally reluctant to forgo the perks they receive doesn't mean they're unconcerned about the financial impact of coronavirus on younger generations.

Around a third (32%) of those we surveyed told us they're financially worse off as a result of the pandemic. A much greater proportion (more than half) said they're worried about the financial future of their children and grandchildren.

Two thirds (67%) of participants felt that younger people have suffered more financially because of coronavirus, and eight in 10 (81%) respondents thought that job creation should be the priority once things return to some level of normality.

However, only 25% felt that benefits for older people should be reviewed to give more support to younger generations, and most people (52%) disagreed.

'We need to pay them back'

Which? member Lorraine Doll

Many respondents in our survey recognised COVID-19's disproportionately severe financial effect on younger people. Lorraine Doll, from Suffolk, is one of them:

'We need to support the young people through training and job creation. My generation has ruined the planet for them, we own all the houses they can't afford to buy and the economy has been ravaged to protect the older generation. We need to pay them back.'

She also proposed tax increases, with the extra revenue raised to be channelled into creating more opportunities for the younger generation through training, or higher benefits payments for those seeking work.

The future of pensioner perks

The House of Lords committee on intergenerational fairness published a major report in April 2019, calling on the government to 'deliver a fairer society'.

Among the committee's recommendations were that any state pension increases should be tied to increases in average earnings to ensure parity with working people, and that free bus passes and the Winter Fuel Payment shouldn't be given until at least five years after state pension age.

It also suggested that people working past state pension age should continue to pay National Insurance contributions (they're exempt under current rules).

The government has confirmed that the triple lock will remain in place in 2021, but its future beyond that remains uncertain.