State pensions are paid by the government to individuals and 2008 marks the centenary of the Old Age Pension Act in Britain. It took ten years of campaigning by liberal reformers, non-conformists, and above all, trade unionists, to win the older people’s right to an income that would abolish the spectre of dying in the workhouse. When the the Old Age Pension Act was passed in August 1908, by the Liberal Party, it was the very first time that the government had accepted that it had a duty to look after people in their old age. Prior to that time the old were completely dependent on the Elizabethan Poor Laws that were put in place first at the end of the sixteenth century, in 1597, and early in the seventeenth century, in 1601. Indeed, although the Poor Laws were amended and modified a number of times in both the eighteenth and nineteenth centuries, the original Poor Laws were not superseded in the UK until the National Assistance Act was passed in 1948. The Old Age Pension Act from a hundred years ago was the first crack in the dam and provided a dignified alternative to Parish support and the poorhouse for ageing UK citizens.
The first payments of the old-age pension were made in January 1909. The benefit was five shillings which was equivalent to about 20% of average weekly income. It was payable to men and women over the age of 70 but later reduced to 65, when average life expectancy was around 50. The average life expectancy was up to 75 by 2000.
For working people on low factory wages it was impossible to save or put anything aside for their old age. Industrialisation had uprooted the rural population and traditional domestic working and family stability suffered, leaving thousands of old people without any support. Their last resort was the workhouse. Modelled upon the prison system, discipline was rigid and breaking the rules could lead to increased working hours, reduced diets or solitary confinement. By 1891, England had a population of just over 29 Million, of which 1.3million were paupers. Amongst those, the over 60s accounted for 31%. The workhouse had become the state’s way of ‘caring’ for the elderly. Since 1908, the state pension has been through numerous changes, most notably becoming a contributory, pay-as-you-go scheme of National Insurance in 1946. But over the years it has not reflected the growth in our national wealth, and as a percentage of average earnings it has continued to decrease.
To pay for the reform in 1909 Lloyd George announced what became known as the People’s Budget. This included increases in taxation. Whereas people on lower incomes were to pay 9d in the pound, those on annual incomes of over £3,000 had to pay 1s. 2d in the pound. Lloyd George also introduced a new supertax of 6d in the pound for those earning £5000 a year. Other measures included an increase in death duties on the estates of the rich and heavy taxes on profits gained from the ownership and sale of property.
The basic state pension in the UK today is one of the least generous safety-nets for older citizens in the whole of the European Union. Less than 10% of GDP.An average earner retiring in 2007 would receive a pension worth just 17% of their salary, compared with an EU average of 57%. The state retirement age, which is set to be 65 for men and women by 2020, will rise to 66 between 2024 and 2026, to 67 between 2034 and 2036 and to 68 between 2044 and 2046. Britain has one of the lowest participation rates of older people in the labour market in the industrialised world. 5.2 per cent of over-65s are in paid employment, compared with 12.4 per cent in the US, 10.2 per cent in Sweden and 22.1 per cent in Japan.