George Osborne has extended over-65 pensioner bonds for three months in response to unprecedented demand.

The bonds stand to make one pensioner in ten better off by a maximum of £680 a year. But with the cost to the taxpayer rising, his plan is attracting flak as well as enthusiasm.

The bond sale will now close a week after the general election. Not surprisingly the Labour Party has accused Mr Osborne of trying to buy the grey vote. But they are not the only critics. Mark Littlewood from the Institute of Economic Affairs dismissed it as a gimmick saying: "Borrowing more expensively than the government needs to, is effectively a direct subsidy to wealthy pensioners from the working-age population."

So is Mr Osborne robbing the poor to aid the rich? Or is he re-dressing the financial balance for people who have been victimised by low interest rates when they are too old to work?

In other words are pensioner bonds justified?

Pensioners are being offered a return of 2.8 per cent on a one-year bond to 4 per cent on a three-year bond. It is well above the best the market can offer (1.85 per cent and 2.5 per cent respectively). The interest is taxable and no individual can invest more than £10,000 in each. That didn't stop applicants jamming the phone lines and crashing the National Savings website in a stampede to buy.

The bond offer has triggered the strongest demand of any retail product in recent British history. More than 600,000 pensioners have already invested to the tune of £7.5 billion. By the time the offer closes investor numbers are expected to rise to 1million and the total investment could reach £15bn.

And that will cost tax payers £500 million when the government could borrow the same money much more cheaply elsewhere. The criticisms since Mr Osborne announced the extension on Sunday have been fast in coming and furious. Younger taxpayers complain about subsidising an older, wealthier generation when they need to save for their own pensions.

There is some justice in this accusation, as there is in Mr Osborne attempting to buy the grey vote, but there is also another side to this story. Yesterday I saw a headline announcing that sixty somethings were healthier than ever. The baby boomer generation has delayed the start of old age thanks to better diet, more exercise and preventative drugs like statins.

But however gung-ho they are, they know they are pitted in a losing battle against time. With every passing year their fitness dips. If they can, many continue to work. For some, having a job provides interest. For others they work for as long as they can because they know life will be tough when they have to make ends meet on the state pension (of around £6,000 a year) and a return on savings of 0.5 per cent.

Fewer are able to work in their 70s and by their 80s almost a third has a serious illness. By then, their savings might make the difference between a tolerable and a miserable old age.

Critics of the pensioner bonds paint a picture of a generation that had it easy in youth and are being cushioned now they are elderly. They point to houses that have risen in value, final salary company pension schemes and perks like a winter fuel allowance and free bus passes for all. They say that the bonds favour the well-heeled.

Certainly there are pensioners who have managed their pensions well and who are therefore comfortable. There are plenty of others who are not. The over-65s are also people who are suffering from low annuity rates. And they don't all have private pensions. Many scrimped and saved when they were younger for that rainy day called being elderly. And then they saw their promised return shrink to 0.5 per cent - that's 50p for every £100 invested.

Not only is it iniquitous for them, it is a sorry message to send to the younger generation: save hard and stay poor.

I bet many pensioners would swap their free bus pass and winter fuel allowance for a decent return on all their savings.

And yes their house price will have risen but for many so has the cost of care.

But low interest rates - a deliberate government policy to grow the economy after the banking crash - haven't disadvantaged everyone. Those with a mortgage have benefited. They tend to be younger people who have been able to spend more of their take-home pay because their mortgage repayments have remained at rock bottom.

All borrowers have benefitted. Low interest rates have also aided job creation. In other words they have helped almost everyone except the over-65s who have had a raw deal for the past four years.

They benefitted high earners, people on big bonuses as well as those struggling on low wages - just as the pensioner bonds will benefit all the over-65s with savings.

Isn't it swings and roundabouts?

Would there be so much finger pointing if the bonds had been introduced at another time? Isn't it the proximity of the general election that is heightening division?

There are just over 11 million over 65s and they vote in much greater numbers than the young and they vote in much greater numbers than the young. It is also the case that those in the demographic group AB are more likely to cast their vote than poorer DEs.

It's a no-brainer to see why Mr Osborne's offer of market-leadings rates on savings bonds was launched in the run-up to the general election and is being extended until after it is over. He might as well sell them under a sign saying Remember Who Looks After You.

This is where I have a problem with Mr Osborne's announcement. He has made it harder to make the case for pensioners deserving a real interest rate on their savings by making it so political. His tactics have done pensioners no favours. The Institute of Economic Affairs commented afterwards that it showed "we are not all in it together".

It pitches the generations against one another. This is a situation government should strive hard to avoid - not foment. It paints the elderly as well- heeled and greedy. But having between £500 and £10,000 of savings to put into a bond doesn't necessarily speak of riches. It might - but it might also be the proceeds of down-sizing from a family home being locked safely in a place that will offer a drip feed of much needed income.

Ros Altman, the older workers tsar, says she welcomes anything we can do to help savers. She'd like to see the scheme extended to 60 year olds. Ideally it would reach all savers. But that would put up interest rates- and that would hit the young with their mortgage repayments going up.

It's a difficult balance to strike - savers versus borrowers; old versus young. Take the general election out of the equation and these bonds could be seen as a lever of justice for a group of people who have, until now, seen their precious savings eroded by inflation. And don't underestimate them. Investing in the bonds doesn't necessarily translate into a vote.