Centenary celebrations for the pension
Although there seems to be very little to celebrate these days, there is one anniversary that should not be allowed to pass by unremembered.
This year marks the centenary of the state pension and with our aging population, plus a growing number of people who are in what could be called pensioner poverty, it is a topic that is very relevant to the present day.
Its history is interesting. Did you know that, contrary to the mantra of the Labour Party’s spindoctors, it was the French back in 1789 or thereabouts who first came up with the idea of a pension for the elderly?
And it was the Germans who, some 100 years later, were the first to actually put a system in place. In 1791 in the UK a man called Tom Paine wrote his now famous book ‘The Rights of Man,’ in which he outlined the ideas of maternity rights, family allowances and pensions for the elderly. He was also opposed to the Poor Laws that saw many people consigned to the Workhouse, from which they never emerged again.
The next person to voice an opinion was Charles Booth, who published a pamphlet in 1891 outlining proposals for an old age pension.
And in 1898 (at a time when women did not even have the vote) a National Pensions Committee was formed, demanding a universal pension at 65 for all men and women. Then in 1902 a campaign group called the National Committee of Organised Labour on Old Age Pensions started up under its founder George Barnes.
However it was not until 1908 when the then Liberal Chancellor David Lloyd George tabled his Old Age Pensions Act that the notion was given any reality.
This pension was of course means tested and hardly very generous but it did establish, once and for all, that the state had a responsibility for providing a pension in old age. The first state pension paid the small sum of five shillings a week from the age of 70 for a single man and seven shillings for a married couple.
Pensions were only paid to citizens with an income of less than 12 shillings per week and applications had to go before a committee of nine people to ensure recipients were of good character. It was not payable if you had not worked whenever you could have done so.
All this, of course, had to be paid for and so major legislation had to be enacted that, interestingly, was championed by both Lloyd George and Churchill, the then president of the Board of Trade. In 1925 the Contributory Pension Act was introduced for manual workers and the provision became more generous.
But after World War Two William Beveridge introduced the 1946 National Insurance Act, which introduced a contributory State Pension Scheme for all and the age at which it was payable was lowered to 65 for men and 60 for women.
In 1975 the State Earnings Related Pension was then added on as a second tier. Today the figures show that life expectancy is much longer — 77 years compared to 52 in 1909. But there are also only four workers now to every pensioner, as opposed to ten in 1909.
What is slightly frightening is that 57% of men in a recent survey said that they plan to rely on the State Pension alone for their retirement. The National Pensioners Convention general secretary, Joe Harris, estimates that there are already over two million pensioners living below the poverty line.
The message is that, despite the existence of a state scheme, we still need to save for our retirement — something that has been totally forgotten over the past decade. It is also a message that needs to be firmly passed on to our children. They may not appreciate it now but, instead of buying them those designer trainers, why not put the money into a savings scheme for them?
They’ll really thank you for it in the future.
Nicholas Watts is an independent financial adviser with Positive Solutions Financial Services which is regulated by the Financial Services Authority. To contact him, use the website www.realwealthmanagers.co.uk