February 8, 2015 / 5:39 PM / 4 years ago

Osborne criticised for extending 'pensioner bonds' ahead of vote

LONDON (Reuters) - Chancellor George Osborne said on Sunday he would extend until after the forthcoming election a scheme allowing pensioners to invest in state bonds that yield much more than normal saving accounts.

British Chancellor of the Exchequer George Osborne attends the session 'Recharging Europe' in the Swiss mountain resort of Davos January 23, 2015. REUTERS/Ruben Sprich

Critics accused Osborne of blatant electioneering ahead of the May 7 ballot, with the ruling Conservatives either neck and neck, or slightly behind the opposition Labour Party in the polls.

Britain’s “pensioner bonds” scheme, which the government says has enjoyed the biggest sales of any retail financial product in modern British history, was originally meant to last just one month and expire on Feb. 15.

However, Osborne said it would now be extended until May 15 and raise around 15 billion pounds, up from a target of 10 billion pounds, the finance ministry said.

Over a million pensioners are expected to benefit from the programme, which pays up to 4 percent interest.

Critics said the move was clearly aimed at wooing older voters, shown to be more likely to vote than younger Britons, and would unnecessarily inflate government borrowing costs.

“Borrowing more expensively than the government needs to is effectively a direct subsidy to wealthy pensioners from the working-age population,” said Mark Littlewood, director general at the free-market Institute of Economic Affairs.

“Pensioner bonds have never been anything other than a gimmick that will benefit pensioners at the expense of the taxpayer. It’s high time our politicians stopped buying votes with subsidies for the old and rich.”

Osborne rejected that charge, saying the decision was motivated by the government’s desire to help savers who have struggled with record low interest rates.

“It’s important we back savers in our economy,” he told BBC TV’s Andrew Marr Show, when challenged on the issue. “By the way many, many of these pensioners do not have large sums of money.”

Prime Minister David Cameron, the Conservative leader, has already suggested he will continue to protect special welfare benefits for pensioners, unlike the opposition Labour Party and the Liberal Democrats, who have both pledged to curb them.

Depending on their age, pensioners benefit from free TV licences, winter fuel payments and free bus passes.

Reporting by Andrew Osborn; Editing by Crispian Balmer

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