Pensions at 100!

There is renewed discussion of the adequacy, or rather the inadequacy, of the state pension in times when elderly people, because of the high proportion of their spend represented by fuel and food, face much higher inflation than the average. But at least there is a pension there - this year seeing the centenary of its introduction. The state pension has been the cornerstone of social security for these hundred years and it has contributed greatly to the goal of a reasonable quality of life for those reaching retirement age.
A state pension was introduced in 1908 by David Lloyd George, the Chancellor of the Exchequer in the Liberal Government at that time. The new pension, which was paid to those over 70, was worth between one and five shillings a week depending on means. Five shillings, also called a crown, was about 20% of average earnings at the time. Winston Churchill, then a Liberal and a member of the Government, described the pension as the making of "that provision for the aged which compassion demands". Such values stand in sharp contrast with the 1980 Government decision to end the link between pensions and earnings.
Liberal politicians introduced the state pension in the face of substantial opposition including resistance from the House of Lords. In the Liberal Democrat office in the Council House in Birmingham we have copies of some posters of the time that illustrate the battle in an old-fashioned political way and I’ve included some of them here.
Lloyd George and other campaigners for the pension sought to start a process that would lead to the ending of poverty for those in old age and to "lift the shadow of the workhouse from the homes of the poor". The social reform legislation of the Liberal government of 1906 - 1914, especially after 1908, is one of the most important collections of measures to improve the lives and opportunities of ordinary people. It made possible future laws and social provision following the 1942 Beveridge Report (the work of another Liberal).

A short history of pensions
1908: The Old Age Pensions Act introduced the first general old age pension of between one shilling and five shillings a week, from the age of 70, dependent on means, from January 1st 1909 - "Pensions Day". William Beveridge, father of the welfare state, was an adviser to the government.
1921: The Finance Act gave tax relief to pension schemes under certain conditions.
1925: The Contributory Pensions Act set up a contributory state scheme for manual workers and others earning up to £250 a year. The pension was ten shillings a week from age 65.
1942: Sir William Beveridge publishes his "Social Insurance and Allied Services" report with state welfare proposals.
1946: The National Insurance Act introduced a contributory state pension for all. Initially pensions were one pound six shillings a week for a single person and two pounds two shillings for a married couple. Paid from age 65 for men and 60 for women, effective from 1948.
1947: The Finance Act limited the maximum amount of tax relief on pensions, and the proportion that could be taken as a lump sum.
1959: The National Insurance Act introduced a top-up state pensions scheme (graduated pensions) based on earnings of between £9 and £15 a week.
1975: The Social Security Pensions Act set up the State Earnings Related Pension Scheme (SERPS). Introduced in 1978, the scheme replaced graduated pensions. Rules for contracting out were also introduced.
1980: The Social Security Act broke the link between state pension increases and average earnings. Future increases based on prices. If the link with earnings had been kept, a single pensioner would now be about £30 better off.
1995: The Pensions Act was a response to the Maxwell scandal. The act set up regulatory and compensation schemes.
1997 saw the removal of tax credits for pension funds on company dividends.
1999 saw the introduction of Minimum Income Guarantee for the poorest pensioners.

Notes and coins in good measure.
In the pre-decimalization currency there were twenty shillings in the pound and twelve pennies in a shilling. There were four crowns to the pound but crown coins were rare. Much more common were half-crowns (also known colloquially as ‘half a dollar’ from the faraway times when the exchange rate was four US dollars to the pound sterling). Coinage used to have character in those days. The coins I recall well started at a farthing - a mere one quarter of a penny so 960 farthings in a pound. Then there was a half penny or ha’penny, the penny, two different threepenny coins, a sixpence, a shilling, a two shilling piece, a half-crown (two shillings and sixpence) and occasional crown coins. This gloriously illogical medley of denominations was the source of much pleasure, not least in the confusion caused to visitors to the country! The next unit up was the very popular ten-shilling note (so fifty pence in today’s terms), then there were one pound notes, five, ten and beyond the likes of which people like me never saw! The most unusual unit of currency was perhaps the guinea - one pound and one shilling - which could be the occasion of an unpleasant surprise when you discovered that a price was quoted in guineas rather than pounds and you had to pay 5% more!
Personally, I still regret the demise of all this (along with imperial units of measure) especially the one pound note. I take the view that the basic unit of national currency should be available in paper form, but the Government eventually put a minor cost saving over the wishes of most of us. Meanwhile in the United States they continued with dollar bills, not daring to face the wrath of the people. I will say nothing of the Euro! In the United States the authorities are trying to run dollar coins in parallel with the notes, but since machines read paper currency very well there’s not much demand for them, and there’s usually a muffled apology when your change includes these coins. One of the problems for US treasury officials is that the dollar bill carries the image of George Washington, the most revered figure in US history. So it is likely that Americans will keep the benefit of having their basic unit of currency in note form for some time yet.