Pension benefit bill has soared by 11% while working-age welfare down 6%

It means pensioners are £500 a year better off than in January 2010

But the chancellor has managed to save just £2.5bn, according to the IFS

Chancellor George Osborne has failed to reduce welfare spending by as much as planned

The elderly receive £500 more every year from their State pension than they did four years ago, says a report.

But the fact pensions have increased has slashed the savings the Government had pledged to make in public spending.

Controversial cuts aimed at reducing the welfare bill have failed to save taxpayers the sums promised by ministers, the Institute for Fiscal Studies (IFS) said.

This is partly due to more generous pension benefits introduced at the same time as the cuts.

Over the past four years, Chancellor George Osborne has unveiled cuts to tax credits and benefits aimed at saving £19billion a year.

But spending on welfare will be just £2.5billion less this year than it was in 2010-11 in real terms.

Ministers are likely to come under pressure to make further savings after the IFS suggested the Government had over-estimated the amount its cuts would save.

The IFS said the savings gap was partly due to a more generous State pension, seen as an attempt by David Cameron to win the ‘grey vote’.

Meagre pay rises in recent years have also left many workers reliant on housing benefits and working tax credits, pushing up welfare bills.

The IFS said that when adjusted for inflation, Britain had saved £2.5billion this year compared with four years ago.

The report’s author, economist Andrew Hood, said: ‘Mr Osborne wants further cuts to social security spending to help reduce the deficit. But he may end up having to make cuts just to stay on track.’

The IFS said that while some benefits such as Jobseekers’ Allowance had been cut, pensioner benefits had risen.

The State pension bill has gone up sharply because of a number of changes including the ‘triple lock’, introduced two years ago. The lock guarantees price rises in line with earnings, inflation or 2.5 per cent – whichever is the highest – to protect OAPs from paltry increases.

But this will cost an additional £45billion over the next 15 years according to estimates. The IFS think-tank also said the UK’s housing benefit bill will be £1billion higher in 2014–15 than it was in 2010–11, despite promises it would be slashed by £2billion.

The rising state pension has contributed to a £5billion increase in spending on OAP welfare, a new study has revealed

This was blamed on poor wage growth and rising rent prices, leaving many reliant on handouts to make ends meet.

Poor pay rises also meant the Government had to pay more in working tax credits for employees on low salaries.

Cuts of £4.6billion to tax credits were announced, but will drop by £2.7billion compared with 2010-11, the IFS said.

The report also blamed ‘significant’ delays in implementing changes to the disability living allowance (DLA). The Government had predicted cuts of £1.2billion, but the study said DLA spending would actually rise by £1.6billion.

Mr Hood said: ‘The government haven’t implemented all the cuts that they announced.

‘But more importantly other things like the number of pensioners and low-paid people have pushed up spending in real terms.’