100 years of state pension – what now?
This is a guest post by Mira
One hundred years ago this month the first state pensioners queued at their local Post Offices to claim the small but often critical amount of money allocated to them under the 1908 Old Age Pensions Act. This act was a watershed in British social policy. With it ended the sole reliance of many of the UK’s oldest people – 490,000 in 1909, mostly women – on the tender mercies of the Poor Law Amendment Act
In 1908, a grim commentary on the social system, older people constituted the largest single group of paupers. When age or age discrimination deprived them of a means of earning, the fortunes of many workers plummeted and the workhouses were populated, alongside the lifelong poor, with people who, while they or their husbands were earning, had lived in relative comfort.
The 1908 act was the culmination of a long campaign. Commissions and committees had ruled out an old age pension in view of the financial and economic difficulties involved and because of a sense that, for many, pauperdom was avoidable or voluntary. However, trade unions and social reformers including Booth, Barnett and Rowntree persisted and in May 1908 the Old Age Pensions Bill was guided through Parliament by Chancellor Lloyd George. Consisting of twelve straightforward clauses it was very simple compared to pension law of today. The Poor Law was retained to both deter and benefit those who were considered feckless or otherwise undeserving, and the pension allowance was set below subsistence level to encourage thrift and discipline (an ongoing balancing act in pension policy). To the dismay of future welfare state architect William Beveridge, the early state pension wasn’t contributory – that came later in 1925 – but funded entirely by the Exchequer. However, unlike Poor Relief recipients, pensioners didn’t forfeit their right to vote and could collect their allowance in relative dignity from the Post Office.
So it happened that from January 2nd 1909, if you passed a (purely hypothetical) thrift test, you could claim a pension on a sliding scale of between 1 and 5 shillings if you were over 70 and a British subject with a weekly income not exceeding 12s (the average at that time was 30s). It’s highly unlikely you’d have been claiming a pension though – life expectancy at birth in 1841 was about 40 years. 40% of the 1.2 million people who, through some quirk of longevity, did live to see 70 were poor enough to qualify and because the older poor were so badly off, the majority of pensioners in 1908 were eligible for the full 5s. This would have been equivalent to about £20 today. That the allowance was a meagre 20% of average income did not inhibit bouts of overwhelming gratitude. In their social and economic history 100 Years of State Pension – Learning From the Past (the subject of a seminar I went to at the IHR, and as jargon-free and engaging a narrative of the state pension as you could hope to read), Salter and colleagues recount the memories of a Post Office clerk:
“in the village there were one or two poorer couples just holding onto their homes, but in daily fear of the workhouse. When the old age pensions began, life was transformed for such aged cottagers. They were relieved of anxiety when they went to the Post Office to draw it, tears of gratitude would run down the cheeks of some, and they would say ‘God bless you, miss’ and there were flowers from their gardens and apples from their trees for the girl who merely handed them the money”.
However, small as the pensions were and poor as the pensioners were, only 25% of them had been eligible for Poor Relief. The workhouses stayed full and for many the last years of life were a time of acute stigma, insecurity and discomfort.
After 1908, the state pension rose from around 20% of average earnings to a high of 26% in 1979, declining to 15% last year. A universal pension was introduced in 1948 and since then contributory schemes, occupational schemes, earnings-related schemes and contracting out have been adopted and adapted in the perennial attempt to balance the demands of welfare, citizenship value and trade unions with the supply preoccupations of social discipline, the needs of the labour market and national income. Supply concerns have won out in recent decades, marked by a shift from state to private, collective to individual, and pay-as-you-go to advance provision. With these trends has come the neglect of areas, and ultimately people, not recognised as economically productive. Linking benefits to career average earnings was a particular blow, and one which fell most heavily on women.
Today most pensioners are eligible for supplementary benefits and the National Pension Campaign statistics show an unacceptable increase in pensioner poverty. In 1891 40% of older people were subject to poor rates; depressingly in 2008 it was estimated that 40% were eligible for means tested Pension Credits. At the current time with the prospects for occupational and private pensions looking terrible, Salter and colleagues propose a rethink of the old questions towards a more equitable deal for pensioners. The fundamental questions are what they’ve always been: what is the state pension for and what level of benefits should the state provide? They go a bit deeper:
- How can a decent standard of living be ensured for those who can no longer work?
- How should the costs of paying for older people to have an adequate standard of living in retirement be split between the individuals themselves, their employers and the state?
- What responsibility should each working generation accept to provide pension benefits, out of general taxation, for the generation in retirement?
- In what ways should today’s pensioners benefit from current productivity and economic growth?
- Should provision differ depending on how prudent or reckless people have been with their money?
- Should a state pension sufficient to live on be paid on a universal basis, or should there be reliance on self provision and restriction of state spending with targeting of those in need on a means tested basis?
- At what age should the payment of a state pension commence and what flexibility and choice should be allowed?
- How should entitlement to a universal state pension be earned – on the basis of a National Insurance contribution record or as a citizen’s right?
- What should be the entitlement of those who rear children, take care of older relatives or become unemployed?
- How can we fund state benefits and, at the same time, encourage thrift and savings?
- Most fundamentally, how do we determine what is an adequate income in retirement and what level of cost is affordable to provide such benefits?
The threats to the state pension are significant. In 1908 there were ten workers for every pensioner; this has shrunk to four. In 1908 only 5% lived to see 70 in the UK; a century on, a quarter of us will achieve 100. There are, as there have always been, reservations about affordability of the state pension, and the Friendly Societies were worrying about the ageing population long before 1909. But it’s worth remembering that the first subsistence-level pension was introduced in 1948 when this country was reeling from World War 2 and indebted to the eyeballs. At the seminar I mentioned earlier Colin Redman, another of the authors, quoted Obama (as one does these days): “the true character of our nation is revealed not during times of comfort and ease, but by the right we do when the moment is hard.”
Comments
| 31 January 2009, 1:11 pm |
Obama’s quite the phrasemaker isn’t he, The irritating little shit.
| 31 January 2009, 1:21 pm |
NO, I realise in fact that a lot of the stuff up there about average income doen’t add up – that’s because I read different things in different places.
| 31 January 2009, 1:26 pm |
Fair enough ;-)
I also doubt that 25% of us will live to see 100 … but the precise numbers don’t matter.
| 31 January 2009, 1:35 pm |
“I also doubt that 25% of us will live to see 100 … but the precise numbers don’t matter.”
N.O, they kind of do, I grant you, to a pension policy maker. The life expectancy projection was off the BBC – but the life expectancy statistics suggest that an average woman born in 2010 will see 82.
| 31 January 2009, 2:25 pm |
I have no idea why it didn’t get into peoples heads that if you live longer maybe you have to work longer.
People of my parents generation are now beginning to retire aged 60 while people of my generation are going to have to work till 70 or even 80 to foot the bill ! I’m not advocating that everyone should be forced to work until they keel over but at the very least the retirement age should be raised to 70 ( with the option to keep working if wanted ).
Oh and cutting off support to anyone who refuses a job wouldn’t hurt either. I recall seeing pictures of the Jarrow marchers walking hundreds of miles in awful conditions just to demand the right to work. That the UK should have millions of layabouts, a lumpenproletariat underclass, is a national disgrace and should horrify anyone regardless of your position on the political spectrum.
| 31 January 2009, 2:36 pm |
There are still some absolutely awful jobs around – jobs that no human being should have to do full time.
| 31 January 2009, 2:46 pm |
Hi, Mira. This is a very thought-provoking article.
* How can a decent standard of living be ensured for those who can no longer work?
I don’t know that it can be ensured, Mira, although it’d make me feel a lot more at peace if it could. It depends on the state of the country’s economy, I think, from year to year, and I doubt that any government would ring fence enough money to ensure it.
* How should the costs of paying for older people to have an adequate standard of living in retirement be split between the individuals themselves, their employers and the state?
At present, the state pension is taxed if a person has an additional pension or other equivalent source of income. I am not sure that it should be taxed at a higher rate although that might take some of the strain off the state. If people pay National Insurance contributions, then the state pension should reflect how much they have paid.
* What responsibility should each working generation accept to provide pension benefits, out of general taxation, for the generation in retirement?
That’s rather a general statement. I believe that the generation in work should take responsibility for saving for its old age, but one cannot stand by and see old people in penury
* In what ways should today’s pensioners benefit from current productivity and economic growth?
That’s a hypothetical question, isn’t it, given the recession? It has been said that the worth of a society is reflected in how it treats its disadvantaged, old and sick, and its children.
* Should provision differ depending on how prudent or reckless people have been with their money?
You mean the notion of deserving or undeserving poor? No provision should depend on this.
* Should a state pension sufficient to live on be paid on a universal basis, or should there be reliance on self provision and restriction of state spending with targeting of those in need on a means tested basis?
It should be sufficient to live on and be paid on a universal basis, because the targeting (given the way in which benefits are currently targeted) is open to mismanagement and people who need it might fall through the cracks. All people who work pay National Insurance therefore benefits should not be means tested. If I have worked all my life, paid NI, never drawn benefits and manage to save a little, then I should not be reduced to drawing on my savings in order to live.
* At what age should the payment of a state pension commence and what flexibility and choice should be allowed?
Many people are not ready to retire from their work at the statutory retirement age, and there is already a mechanism in place to defer the state pension until the age of 70, I think. However, contributions to the state pension stop at statutory retirement age, which means that people who decide to carry on working beyond that don’t get a state pension which mirrors their extra working years.
* How should entitlement to a universal state pension be earned – on the basis of a National Insurance contribution record or as a citizen’s right?
Not sure about this, Mira. NI contribution seems the most fair but I am left with wondering about how people will live if they have never worked for whatever reason
* What should be the entitlement of those who rear children, take care of older relatives or become unemployed?
Again, this is a broad question. They should be entitled to the full state pension. Many carers for elderly relatives take the strain off the state for providing that care. I know that they can claim various carers’ allowances, but their work, as it were, has been caring and it has been unpaid. The same goes for those who have taken a break from paid work to bring up children. They should not be penalised because of this.
* How can we fund state benefits and, at the same time, encourage thrift and savings?
Funding: ahem… higher taxes? And I am not sure that we can encourage thrift and savings if people are not leaning in that direction.
* Most fundamentally, how do we determine what is an adequate income in retirement and what level of cost is affordable to provide such benefits?
Adequate income has to be based on the cost of living, doesn’t it? As for the affordable level of cost, I simply don’t have the first idea!
| 31 January 2009, 3:38 pm |
I think it would be better really if we had:-
A compulsory pensions savings scheme.
A basic citizens income (all ages of adults).
A legal duty on all citizens to provide for themselves if they are capable of doing so and to the extent they are capable. Say goodbye to welfare, the social heroin that the state keeps pumping into the body politic.
Productive employment for all – i.e. the state would have a duty to provide work for those who cannot find it elsewhere. There are plenty of useful things for people to do outside the conventional economy.
| 31 January 2009, 3:49 pm |
Thank you for these thought-provoking answers Mitnaged. I have to confess to hardly having given pensions a thought before this centenary year, and to me these questions would be very difficult if we were starting from scratch, let alone starting from where we are now.
An adequate pension should be enough to provide freedom from care, and there should be other means available to protect against bad turns of fate. Apart from that I have very utopian beliefs about money, where a lot of value is created but nobody is inclined to get very rich. As that old geezer said, from each according to their ability, to each according to their need. They are quite helpful as ideals but I don’t think I’ll be making it into any think tank in the near future.
| 31 January 2009, 4:01 pm |
Field, there are a lot of problems with private pensions – sadly you have to know what you’re doing, more than the average person. A report from last month found that 40% of the value of private pensions is eaten up by charges.
| 31 January 2009, 4:10 pm |
There are still some absolutely awful jobs around – jobs that no human being should have to do full time.
Given the combination of minimum wage/health and safety legislation, what entitles someone to decide that a job is so “absolutely awful” that their refusal to do it should have no impact on their benefit entitlements?
| 31 January 2009, 4:18 pm |
Superlative article Mira…and a welcome antidote to all the other (well written, articiculate) dross!
1909, if you passed a (purely hypothetical) thrift test, you could claim a pension on a sliding scale of between 1 and 5 shillings if you were over 70 and a British subject with a weekly income not exceeding 12s (the average at that time was 30s).
These figures seem hardly credible. One of my grandfathers was a farm labourer and he told me his wage (20s/30s) was 8 shillings/week. 30s in 1909 sounds like a fortune to me. Does anyone have any other anecdotes?
I notice you highlight the usual stalwards of statism, but what of the contribution of the Church to the fight against indigence pre-20th century?
I would welcome the complete abolition of inheritance tax. The state has progressively (excuse the pun, you ‘progressives’ out there) smuggled more and more of our taxes out for themselves and their favoured clients. There would be no pensions timebomb or advocates for onshore offshoring of labour if the bloated welfare bill/client coffers were diverted to pensioners and the truly indigent through no fault of their own.
There would be cheers similar to those voiced when Red Ken and his GLC were abolished as people could take more responsibilty for their own financial welfare.
Hoorah! Hoorah! Hoorah!
| 31 January 2009, 4:28 pm |
Excellent post, very informative.
| 31 January 2009, 4:28 pm |
Field
I think it would be better really if we had:-
A compulsory pensions savings scheme.
A basic citizens income (all ages of adults).
A legal duty on all citizens to provide for themselves if they are capable of doing so and to the extent they are capable. Say goodbye to welfare, the social heroin that the state keeps pumping into the body politic.
Productive employment for all – i.e. the state would have a duty to provide work for those who cannot find it elsewhere. There are plenty of useful things for people to do outside the conventional economy.
Are you Stalin?
| 31 January 2009, 4:31 pm |
Cranmer I suppose ‘average’ is a crude measure. There was a huge amount of wealth in the UK in 1908, don’t forget – it was just very concentrated. There was a lot of inequity. But it is entirely possible I got it wrong. I’ll have a dig around and find out (with sources this time). Give me half a tick or so.
| 31 January 2009, 4:34 pm |
We need a unified system of personal tax allowances, benefits, pensions, student funding and minimum wage legislation, so that no one’s tax-free income falls below half national median earnings.
We need to give every household a base of real property from which to resist both over-mighty commercial interests and an over-mighty State.
We need to abolish non-domicile tax status.
We need to ensure a permanently higher rate of corporation tax on the banks and the privatised utilities, with the money spent on reimbursing employers’ National Insurance contributions for workers aged 25 or under and 55 or over, and with strict regulation to ensure that no cost is passed on to workers, consumers, communities or the environment.
We need to bring about the mutualisation of the banks, and the return of the utilities to public ownership.
And we need to ban any company from paying any employee more than ten times what it pays any other employee, with the whole public sector (including MPs and Ministers) functioning as one for this purpose, its median wage pegged permanently at the median wage in the private sector.
That would be the first morning in office sorted out, anyway.
What about after lunch?
| 31 January 2009, 5:01 pm |
Well, it was James Purnell who told the Department for Work and Pensions that one in four babies born today would live till 100.
And here is the bloke I read who went digging for the average wage – he says:
“I have on my desk a well-worn copy of G D Gilling-Smith’s definitive tome entitled ‘The Complete Guide to Pensions and Superannuation’. … On page 14 of that book Gilling-Smith confirms that the first state pensions paid out in 1909 following the provisions of the 1908 Act were indeed at the maximum rate of five shillings a week. So far, so good. He then goes on to say that “the average weekly wage was at that time about thirty shillings a week”.
If that’s right then the five shilling pension would have been worth a sixth of that, 16.67% of average earnings.”
| 31 January 2009, 5:11 pm |
“At what age should the payment of a state pension commence and what flexibility and choice should be allowed?”
OK, so I would prefer the abolition of the pension altogether and replacement of all of the various parts of the welfare state with a citizen’s basic income. That would be around and about the same level as today’s pensions minimum income guarantee (about 115 a week I think).
In the absence of that we need to remember that the old age pension is a social insurance policy. “Insurance” is the word here, it’s to insure against an event that is not likely to happen (assurance is the word for something that is likely to happen. Life insurance is in case you die in a specific period, life assurance is to pay out when you die.). Such as you outliving your savings. And we go on to assume that you’re reasonably rational in the savings that you do make.
As is obvious from the post above, when it started (and Bismark’s earlier scheme upon which it was based) was an insurance scheme. The pension kicked in at above the average (adult, for we only want to think about those who start work and thus can save, not those who die in childhood. Thus it’s life expectancy at age 18 we’re interested in, not birth) age of death. You thus had a less than 50/50 chance of reaching pensionable age. You would, rationally when working, save some amount (and the Friendly Societies prove that people did indeed do so) but what happened if you lived longer than your savings lasted? Thus the insurance scheme.
Now of course the pension is an assurance scheme. The vast majority of us expect to make it to pension age and most of us will be hale and hearty when we do so. You can do whatever you like with the savings that you’ve made but perhaps we should return the state pension to what it was intended to be. An insurance scheme. It kicks in at the average age of death (obviously, this has to be calculated by the previous cohort,. so we can actually measure it). Pensions (state ones that is) would start at roughly 75 for men and 77 or 78 for women then. Meaning that they could be raised substantially at the same time that the age limit is.
| 31 January 2009, 5:14 pm |
There are more older people and less younger people (proportionately as the world population is growing – http://blog.futurelab.net/2007/08/the_world_is_getting_older_and.html) and people are living longer. Therefore, pensions are going to cost more and those of us under 50 are going to have to work longer than 60 or even 65 (assuming we are in the middle of recession and not the end of the world as we know it in which case we all need some different skills). The issue seems to be that either politicians don’t really want to tell us this or we don’t want to here it.
If you factor in that over 40% of people are now going to university and therefore not joining the full time work force until they are at least 21, expecting to be able to then retire at 60 is really having your cake and eating it.
| 31 January 2009, 5:35 pm |
Excellent post and very informative.
As for Patrick’s remarks about the ‘white underclass’ -It seems to me (admittedly as a bit of an outsider) that this is directly a result of recent years of government policy. A system has been created in which there is little or no incentive to work at minimum wage level. For a lot of people, particularly those claiming child tax credits, it is often more profitable not to work. It should therefore come as no surprise that there is less money available for pensions. Until the government starts getting its maths right and ensuring that even those who work in minimum wage jobs are significantly better off than those who don’t work (the able-bodied, of course) there is little chance of the state pension pot refilling.
Additionally, reform is needed in the area of sick pay. An average illness does not last more than 10 days – flu, strep throat, cold, stomach upset etc. I would therefore propose that a GP should only be able to sign a person off for a maximum of 10 days, and that the employer should pay the full wage for the last 7 of these 10 days in order to combat the ‘throw a sickie’ syndrome. Any sickness benefit lasting more than 10 days should be paid for by NI, subject to a medical examination every 6 months by a consultant who is an expert in the particular field employed by the NI. This would drastically reduce the burden on employers and weed out many of those on long term sickness benefits or disability allowances.
Britain needs to get as many pre-retirement age people back into work as possible – not penalise the pensioners who have already done their bit.
| 31 January 2009, 6:28 pm |
Cranmer I suppose ‘average’ is a crude measure. There was a huge amount of wealth in the UK in 1908, don’t forget – it was just very concentrated. There was a lot of inequity. But it is entirely possible I got it wrong. I’ll have a dig around and find out (with sources this time). Give me half a tick or so.
@Mira
No, you deserve a full tick and a gold star ;-)
Thanks for the supplementary info. – I wasn’t saying definitvely that you were wrong per se, just that an anecdote from my grandfather contradicted your assertion…maybe he was exaggerating the wages for agricultural employees in rural Essex, I don’t know. Alas, God rest his merry old soul, he’s not around to ask.
David Lyndsay
You make some good points, many of which pass right over my head. However, as much as I admire your demonstrable aims, I felt a shudder pass through me as I read these words:
[...]we need to ban any company from paying any employee more than ten times what it pays any other employee[...]
Whoah! Something my Dad used to tell me about ‘if you gave everyone in the world 5 pounds, after 10 mins…’ occured to me. Must we limit capitalist endeavour to achieve an equitable society? I fear you see the return of feudalism on the horizon, but don’t we have that already with our client state? Wouldn’t it be infinitely more pleasant to live in a society where the state kept its nose out of the market place and left it up to individual conscience to decide on the allocation of capital? The Barry Hearn’s of this world should be admired rather than chiseled down.
| 31 January 2009, 6:38 pm |
All very interesting, like Cranmer partly over my head. OK so Israelinurse is principally keen to eradicate malingerers, Cranmer is worried about the corrupting influences of welfare, David wants integration of benefits, revenue through taxation and reduction of inequality, and Tim wants to turn the universal pension back into an insurance scheme, but rather than making it available to the deserving poor he’d give it to the poorest poor. Somebody said something about forcing people to work.
Everybody is in favour of encouraging self-reliance in advanced age and most seem to follow the dominant argument of the past three decades, which is the same as it was in the C19th – that the state should only intervene as a last resort. Despite this, according to the book I mentioned, older people seem to be as or more dependent on means-tested benefits (which as a general rule discourage savings) as they were in 1908 and the UK spends less than half of what most countries in the EU spend on state pensions. They also quote somebody saying that the UK could pay a universal pension at 22% of the national average for a third of the subsidies we pay to private pension funds. And considering that the private funds take 40% in charges…
A universal provision through general taxation – as in Scandinavia – sounds like a much more equitable and socially responsible pledge to me. I’d keep a universal provision for older people as we do for younger people, and find a way to fund it somehow.
| 31 January 2009, 6:46 pm |
Cranmer asks:
“Are you Stalin?”
Hardly.
I am interested in cultivating people’s autonomy not ruling over them. It’s the Stalinoids who like the fact that millions of people are completely dependent on the state in the most pathetic ways.
I want to see self-sufficient individuals and co-operative action.
What’s wrong with making people save for their pension (rather than paying for other people’s pensions through the tax system)?
What’s wrong with the idea of a basic citizen’s income to help us rationalise the income tax system and remove disincentives to work?
What’s wrong with the idea that people should have the right to paid employment if they are prepared to work?
| 31 January 2009, 7:02 pm |
Field, on the subject of making people save, I’d point out that uptake of the private pensions has been bad, as we know, and there is a general disaffection with saving now because of the financial crash. The way I see it, if we have to rely on state coercion to contribute to a your own private pension scheme, then the reasons for individualising pension provision kind of disappear. The whole individualisation thing is supposed to be about freedom – isn’t it?
| 31 January 2009, 7:02 pm |
Field, on the subject of making people save, I’d point out that uptake of the private pensions has been bad, as we know, and there is a general disaffection and nervousness about saving for that far ahead now because of the financial crash. The way I see it, if we have to rely on state coercion to contribute to a your own private pension scheme, then the reasons for individualising pension provision kind of disappear. The whole individualisation thing is supposed to be about freedom – isn’t it?
| 31 January 2009, 7:04 pm |
oops – twice. anyway, I have to go now.
| 31 January 2009, 7:16 pm |
Must really put in a good word for malingering. Nothing wrong with it at all. Most of the really rich do it most of the time. Living off the wealth produced by others. Wage slavery? Why bother when you can inherit your parents wealth which was created by other people’s parents in the first place. What you seem to be objecting to is “inferior” types – - “white underclass” a recurrent meme of the increasingly threatened & nervous middle classes. Bless ‘em.
No surprise that most of the above have a demonised group they need to feel superior to and want to impose punitive sanctions on as part of their mind-set.
All one big stinky red herring. The pension system was the first to be pillaged by the cityboy gangsters. So please, direct your venom at the guilty men and leave the little guys and gals alone. They’re just getting by. And the best of luck to them all.
| 31 January 2009, 7:33 pm |
they kind of do, I grant you, to a pension policy maker
Yes, sorry, I didn’t mean to imply that the figures aren’t important, only that the precise figures don’t matter to this general principle of this discussion. But I still think that 2010 hasn’t happened yet, so those born in 2010 can’t be ‘us’ ;-)
| 31 January 2009, 8:08 pm |
This post is about pensions not about whether people take sickies or how companies should manage them or whether we have nillions of people malingering who should be working (where in the current economic climate?), having said that …….. As a manager in the private sector my experience is that well run and efficient companies will manage their sickness levels and patterns in a way that means they don’t need state intervention.
In general if your employees find the work place you provide them so bad they want to take sickies all the time then you need to be looking at what is wrong with that working environment.
| 31 January 2009, 8:33 pm |
The pay for an artillery gunner in the Gordon Highlanders during WW1 was one shilling per day. And of course they got their food, and occasionally some baccy.
| 31 January 2009, 9:01 pm |
I like this post, Mira, and there are a lot of questions it raises to which I personally have no answer. However, here are some of my thoughts:
Nobody seems to have made the basic point that we [my baby-boom generation] have been getting away with paying a derisorily small sum per week or month for our state pension. The govt should have been taking about 40%-50% of our earnings to fund it, given modern life-expectancy. Then there wouldn’t be the absurd situation of pensioners living longer and longer and the funding for the pensions being provided by fewer and fewer people.
In one sense we are not entitled to this, as it is our generation which has been so keen to lower indirect taxation. But on the other hand, yes we are because it is tax-cutting politicians who have got us into this mess, most of us being ignorant of the true situation until recently.
It has seemed obvious to me for ages that eligibility for the state pension, and a lot of other state-provided benefits, should be means-tested. The country simply cannot afford to pay out vast sums to the middle classes for education etc just so that they can buy a second car and go to Torremolinos or wherever every year; so with their pensions. I entirely agree that those who can fund their own pensions should have to do so.
Private pension schemes are too often linked to the stock market. They should be divorced from it and administered by an indepependent body committed to safe investments. Pension funds have too often dabbled in foolish schemes and lost their contributors’ savings. This should not preclude the contributors themselves from making riskier choices, but they should not then come whingeing if they suffer losses.
However, people aged 70 are now so much healthier and fitter than even 50 years ago that they are quite capable of light work. This needn’t be paid employment; just growing one’s own food can be its own rewarding occupation. I’d far rather do that than get paid to buy other people’s food.
| 31 January 2009, 9:13 pm |
I don’t see how we can change the basis of the State Pension to a means-tested allowance. That would be grand larceny on the part of the treasury against a population who have been forced to pay contributions throughout their working lives.
However, the welfare state does need to be drastically curtailed. It was never intended to sustain a vast cohort of fit young lazy scroungers in idle comfort.
| 31 January 2009, 9:47 pm |
Field
Sorry old bean.No offense intended. Specifically, it was these words that scared the bejesus out of me:
Productive employment for all – i.e. the state would have a duty to provide work for those who cannot find it elsewhere.
The rest of what you suggest sounds eminently sensible to me. Where do you stand on onshore offshoring of British labour?
Of course, most of these discusions are all academic given that pensions and all financial services policy will soon become an exclusive EU competence, and with President Blair at helm.
By the way, how do you express ‘cultivating people’s autonomy’ in the Caucasus? ;-)
Me Here
Living off the wealth produced by others.
What’s wrong with bequeathing the fruit of your labours for the benefit of generations to come? You sound dreadfully Red to me. Do you own a Zastava?
Prostate Julian
It has seemed obvious to me for ages that eligibility for the state pension, and a lot of other state-provided benefits, should be means-tested. The country simply cannot afford to pay out vast sums to the middle classes for education etc just so that they can buy a second car and go to Torremolinos or wherever every year; so with their pensions. I entirely agree that those who can fund their own pensions should have to do so.
The picture you paint of the so-called middle classes doesn’t ring true to me. Isn’t it rather unfair to have to pay for private schooling for example and also have to dole out for the sub-standard comp down the road? Isn’t it unfair to struggle to afford one child with another on the way (if you can afford him/her) whilst some irresponsible person has 6/7, by different fathers and forces you to pay for them? Are you Barry Obama?
| 31 January 2009, 9:54 pm |
All pensions, in the end, rely on the stock market. Having the State pay them just means, at best, if they are well run, that dependency is hidden. The State goes into debt to pay out during bad times.
But more importantly, the State is a weak reed. The idea you can rely on them to pay you anything is absurd. If you give your pension money to them, they will fritter it away and you will be left with nothing.
The solution to high fees for private schemes is market tracking. You can invest your money in funds that exactly match the Footsie and their fees tend to be 1 or 2 percent. Seems reasonable to me.
However all this is idle speculation as insurance is forbidden in Islamic law and the only likely outcome for Britain in 40 years time is Sharia so we are debating angels on pinheads here.
| 31 January 2009, 9:59 pm |
I don’t see how we can change the basis of the State Pension to a means-tested allowance. That would be grand larceny on the part of the treasury against a population who have been forced to pay contributions throughout their working lives
And this would be the first time?
| 31 January 2009, 10:00 pm |
“What’s wrong with bequeathing the fruit of your labours for the benefit of generations to come? You sound dreadfully Red to me. Do you own a Zastava?”
What’s wrong with it?What’s right about the dead having control over the affairs of the living you mean.Haven’t you seen Brewster’s Millions?
An interesting post though.I think this
But it’s worth remembering that the first subsistence-level pension was introduced in 1948 when this country was reeling from World War 2 and indebted to the eyeballs.
is a good point to aim at those who say that with an ageing population we can no longer afford the state pension.
| 31 January 2009, 10:18 pm |
What’s right about the dead having control over the affairs of the living
The same as the right of anyone to give their property to whomsoever they choose. The fact that they died before implementing their right is not germane.
| 31 January 2009, 10:33 pm |
Or the lawful right of the Roman citizen to kill his children.
| 31 January 2009, 11:01 pm |
What this post seems not to take into account at all is the tax base that would have to provide for any increase (or even maintenance of ) pension provision. For decades, UK governments have got away with running a Madoff-style Ponzi scheme with pension contributions–those of the younger entrants paying for the payouts to the oldest. But we are moving very rapidly to the point where the number of over 60s and over 65s’ entitlements substantially exceeds the tax income coming from a continuously shrinking working population (as the post seventies population drop becomes a majority of the workforce). So whatever seems desirable has to adjust to a tax base which suggests we may need to cut rather than increase payouts.
And that’s without beginning to think about the cost of the huge and ever increasing numbers of pensioners with dementia and other conditions who require costly care, beyond what families and individual carers can give.
To give one example: my mother is 92, has severe dementia and is also highly physically disabled, partly through the dementia and partly through arthritis. After four years of battles with the local authority they have finally agreed that she qualifies for NHS Continuing Care in her home. Cost to them: £1,480 per week. Over £90,000 per year.
One of the present ways the govt and local authorities cope is to make it all but impossible for any but the most determined applicants (or rather their family representatives) to get this funding, even though there are clear Department of Health guidelines that set out what the entitlements are. Local authorities train their staffs in a thousand different ways of interpreting all the guidelines so that they turn down the vast majority of applications. Unless you’ve spent weeks hunting down the gen on the internet and have a lot of experience with knowing how to record and present evidence–and how to challenge the various inventions they use to get round the guidelines, you’ve virtually no hope.
I’ve been saying to my daughter for some years that people are going to turn back to having larger families, in the hope that at least some of them will turn out to be dutiful enough to help them live to the end of their days in dignity and in their own homes (without being pressured into a “duty” to commit suicide or agree to euthanasia).
| 31 January 2009, 11:35 pm |
Judy, I take your point about the need for a healthy tax base to support the beneifts system and the pension system. But we are making the whole situation steadily worse.
The pension system is at least a contribution based scheme. It is the benefit gravy train that is bleeding us white. Our pensioners and disabled people could all be a whole lot better off if we stopped throwing money at working age people who have never worked, and never will. They are bringing babies into the world and using those children as keys for the extraction of welfare money, and free housing. We have to stop doing that.
| 1 February 2009, 2:35 am |
The pension age will need to be raised if pensions are to be afforded, it is as simple as that. At present the average death age is 74 (men) and 78(women). This will rise. What we don’t know is what age the post vaccination cohort will live to. Some people, including me, think that one of the biggest causes of death in late middle age is due to the trauma of infections in infancy. We could see a sudden bump in the Western world with the age of death climbing to the mid-80’s or early-90’s, over the next decade.
| 1 February 2009, 7:14 am |
In the US the fastest growing population was the age 80+ only a decade ago; now it’s the age 85+ cohort. And as Judy points out, what is being run is the world’s largest Ponzi scheme. In the US surveys consistently show that people under 35 believe there is a greater likely-hood of UFO’s landing on the White House lawn than that they will ever receive Social Security.
BTW, I loved “Nearly Oxfordian’s” reply to worries about means-testing being grand larceny on the part of the govt. upon those who had already contributed: “And this would be the first time?”
LMAOROTFPIMP!!!!!
What a succinct, cynically hilarious and pathetically true retort!!
| 1 February 2009, 8:22 am |
Very interesting – nice to have a fresh topic raised here.
Patrick G said:
“Oh and cutting off support to anyone who refuses a job wouldn’t hurt either. I recall seeing pictures of the Jarrow marchers walking hundreds of miles in awful conditions just to demand the right to work.”
That reminded me of my recent experience of reading The Ragged Trousered Philanthropists (written in 1910, published 1914) for the first time. Although it’s seen as a socialist classic and it’s certainly an eloquent attack on labour/welfare conditions at the time it struck me that the novel could be read as an endorsement of quite conservative policies. Nearly all the characters in the novel are more than willing to work and only suffer because there is almost no welfare or health provision of any kind. They wouldn’t understand, I think, why welfare shouldn’t be held back from those who repeatedly turn down opportunities to work. (Johann Hari wrote an interesting piece along these lines (Independent 21/7/08)).
On a slightly off topic but related note, can anyone think of a good reason why mortgage payment insurance shouldn’t be made compulsory in the same way car insurance is?
| 1 February 2009, 8:35 am |
Patrick G @ 31 January 2009, 2:25 pm
“People of my parents generation are now beginning to retire aged 60 while people of my generation are going to have to work till 70 or even 80 to foot the bill ! I’m not advocating that everyone should be forced to work until they keel over but at the very least the retirement age should be raised to 70 ( with the option to keep working if wanted ).”
You ‘ve rather missed the point. The retirement age has already been raised. People of my parents’ generation mostly began work aged 14; most of my aunts and uncles did. My wife’s father began work younger than that. Before long the majority will begin work aged 21 or older.
So “young people today” are still likely to work for a smaller proportion of their lives than previous generations; its just that the working years will be later.
| 1 February 2009, 8:42 am |
MITNAGED @ 31 January 2009, 2:46 pm
” If people pay National Insurance contributions, then the state pension should reflect how much they have paid.”
That is precisely the principal that has looked after old men and let old women become poor. Although I do realise you made some comments about periods of caring.
No-one has yet made any informed comments about the growing minority earning their living in different countries for substantial periods. What kind of internaitonal treaty do we need about pensions contributions and payments? Methinks it might be much more complicated than mutual recognition of National Insurance contribitions for urgent health care.
| 1 February 2009, 9:05 am |
Sarah @ 1 February 2009, 8:22 am
“The Ragged Trousered Philanthropists …….. seen as a socialist classic and it’s certainly an eloquent attack on labour/welfare conditions at the time it struck me that the novel could be read as an endorsement of quite conservative policies. Nearly all the characters in the novel are more than willing to work and only suffer because there is almost no welfare or health provision of any kind. They wouldn’t understand, I think, why welfare shouldn’t be held back from those who repeatedly turn down opportunities to work.”
Rights and responsibilities go together. Socialism gets into trouble when it drifts away from those values into liberal mush.
I haven’t read the book, but when I saw the play at the Theatre Royal Stratford, they painted the set every performance.
| 1 February 2009, 9:45 am |
RTP is a really good read … can I quickly recommend a very recent novel which also deals with the moral and practical problems associated with the welfare state, Chris Beckett’s ‘Marcher’. This is set in a near-future England in which those who depend on benefits are disenfranchised and live in special ‘inclusion zones’ which, in some cases, they are banned from ever leaving.
| 1 February 2009, 11:59 am |
Indeed an interesting post. I had a grandmother who was born in 1905, and she recalled, from before she went to school, seeing an old woman in her village totter down to the post office to collect the five bob.
Was there not an encounter towards the close of The Ragged Trouser Philanthropists in which Owens met an old acquaintance (name eludes me) who was then writing speeches for some ruling-class grandee. Appalled, Owens asked why.
Because I need the money.
As has been said, although there is a lumpen class, they are not representative of the unemployed or, I dare say, millions strong. My mother, until she reached retirement age, was L.T.U. despite her best efforts to make use of her university education and teaching experience.
For every Madoff in custody, there will be a wheen of other ‘banksters’ who made off with bonuses after pension funds were frittered away. I recall as this was happening in the 1990s, or explicitly during the Enron debacle and wattknot, ordinary working or lower middle-classes were told, in perfect seriousness, that placing all their chips on one horse – that is, company pension/shares schemes which directors and stockbrokers had made wads from – was reckless.
In other news, is this the Powellite strikes against immigrant labour of 40 years ago, or are the non-white faces being kept off the screens?
| 1 February 2009, 2:17 pm |
‘These figures seem hardly credible. One of my grandfathers was a farm labourer and he told me his wage (20s/30s) was 8 shillings/week. 30s in 1909 sounds like a fortune to me. Does anyone have any other anecdotes?’
Your grandfather is right, but there were grades of farm labourers, from boys aged 14-18, who got half wages, to skilled jobs like ploughing, which required knowledge of horses. Ploughmen (in Scotland, anyway) got £30-35 pa. I suspect your grandfather’s anecdote is based on his starting pay as a young lad.
Plus farm workers got board and lodging, and some food and coal thrown in. Then I suppose there was also what you could fish, poach and scoop up from the wild. Hugh Fearnley-Whittingham is just building on country lore of recent generations. So much so, that even though agricultural wages were acknowledged to be pretty dire, they were often able to save their meagre earnings – away from the temptations of the town.
But prospects were awful. Farming was becoming more mechanised, and there was zero possibility of buying a small-holding, even a heap of stone with a cabbage patch. Landowners wouldn’t sell tiny patches of land.
| 1 February 2009, 2:22 pm |
‘In other news, is this the Powellite strikes against immigrant labour of 40 years ago, or are the non-white faces being kept off the screens?’
Brown is a Stalinist. Globalisation is NOT working. All power to the wildcat strikers, I say. Brown needs to think again, bargain harder with the EU and the international forces of globalisation.
He said he would defend British jobs, so do it, Gordon. Don’t replicate the old army system – where everybody gets to kick the cat.
| 1 February 2009, 4:45 pm |
Sarah, the reason car insurance is compulsory is to ensure that victims of accidents where you are at fault can be compensated. No-one else is hurt if you default on your mortgage.
| 1 February 2009, 8:06 pm |
Brown needs to think
The very definition of an oxymoron, surely?
Oh, OK, I know it’s an imperative, not a factual statement … but you know what I mean.
It simply won’t happen. It is a physical impossibility.
| 1 February 2009, 9:14 pm |
devorgilla @ 1 February 2009, 2:22 pm
“Globalisation is NOT working.”
Globalisation is giving millions of people the opportunity to become workers instead of peasants.
| 1 February 2009, 9:18 pm |
Cranmer @ 31 January 2009, 6:28 pm
“Wouldn’t it be infinitely more pleasant to live in a society where the state kept its nose out of the market place”
Cranmer, do you think this statement actually has any meaning?
A market is a human institution that operates under the rule of law. Without the state there would be no markets.
| 2 February 2009, 8:09 am |
ag @ 1 February 2009, 4:45 pm
“Sarah, the reason car insurance is compulsory is to ensure that victims of accidents where you are at fault can be compensated. No-one else is hurt if you default on your mortgage.”
More than a bit oversimplified. Even if you live by yourself in the dwelling, your loss and homelessness affects others. If you’re a non-resident landlord and your tenants are evicted as a result of your default, lots of people may well be affected at great personal and public cost. Just one of the reasons why we need a new legal framework for landlord crime.
Very interesting and instructive – thanks!
On a point of statistical fact:
the majority of pensioners in 1908 were eligible for the full 5s. This would have been equivalent to about £20 today. That the allowance was a meagre 20% of average income
Are you saying that today’s average annual income is really ca. 5000 pounds?