By Daniel Hunter
The three main political parties in Westminster are all looking at pensioner spending, this is shaping up to be a key battleground for the next election.
The only meaningful way to save money on state pensions is to raise the state pension age sooner. This could raise an additional £13 billion for the government.
The Triple Lock inflation protection now looks doomed. From 2015 onwards, the state pension will probably revert to rising in line with earnings.
Labour and the Lib Dems have indicated that they will means test the winter fuel payment. It is important to note therefore that the total cost of the winter fuel payment to all pensioners is around £2 billion. Means testing it, with the additional bureaucratic costs this introduces couldn't hope to cut more than a couple of hundred million from the DWP budget. It is token politics, more about sending messages to the electorate than about restoring the country's finances.
The state pension costs around £80 billion. Reforms are already in train and cannot be derailed. From 2016 we will have a single tier state pension.
The only option to save real money for the Treasury is to raise the state pension age again. It is already scheduled to rise to 65 for women by 2018 and to 66 for men and women by 2020. This is too close now to be tinkered with again.
The next rise is to 67 between 2026 and 2028. Meaning that anyone born in 1961 or later (aged 52 or younger today) won't retire until age 67. This could in theory be accelerated to between 2022 and 2024, meaning anyone born in 1957 or later (aged 56 or younger today) might have to wait until age 67.
The National Institute of Economic and Social Research has estimated that an increase in the state pension age of 1 year would save the Government £13 billion.
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