Institute of Actuaries, 2009, vi + 266 pp, pbk 1 903 965160 , £16.95
2008 was the centenary of the Old Age Pension Act 1908, which established the first state pension: an income-tested non-contributory pension for everyone aged over 70. The Institute of Actuaries and Tony Salter and his colleagues are to be congratulated on a book which celebrates that centenary and which more than fulfils the promise of its title.
The history of state pensions is recounted: the failure of the Poor Law of 1601 and the Poor Law Amendment Act of 1834 to relieve old age poverty; Lloyd George’s 1908 Old Age Pension Act; the growth of contributory pensions for various groups between the wars; Beveridge’s report and the National Insurance Act 1946; the persistence of means-tested pensions in a context of low national insurance pensions; earnings-related contributory state pensions; contracting out of the earnings related pension; the equalisation of state pension ages; winter fuel payments; and the Minimum Income Guarantee and the Pension Credit. The chapters are full of historical and financial detail, and the discussion of state pensions takes place where appropriate in the context of discussion of occupational and private pension provision.
Chapter 12 is entitled ‘Learning from the Past’ and sets out from the important statistic that the current basic state pension is worth less today as a percentage of average earnings than it was when the first old age state pension at 5s (25p) per week was paid to the first pensioners on the 1st January 1909. It also sets out from the question as to the extent to which it is the state’s role to ensure adequate social pension provision for the elderly (p.173).
The authors express concern that 40% of current pensioners could qualify for the means-tested Pension Credit, that this percentage could increase, and that up to 1.8m pensioners who could claim Pension Credit don’t do so because of ‘the complexity of the claiming process and the stigma associated with being dependent on state benefit’ (p.178). As for current rates, the basic state contributory pension provides an income of below 16% of average earnings (p.178). The authors are also disturbed by the increasing income gap between pensioners with private pensions funded by contributions on which tax relief has been granted, and pensioners reliant on means-tested Pension Credit. To provide a universal pension at the same rate as the threshold for means-testing would cost only one third of the cost of tax relief on private pension contributions.
The authors believe that ‘the basic state pension ….. should continue to be the bedrock of pension policy’ (p.183) and they discuss the feasibility of providing a universal basic state pension. Such a universal and unconditional pension would mean that pensioners would retain the benefit of their savings, thus making it more likely that people would pay for private pensions.
The book closes with some helpful outlines of the main legislation on state pension provision since 1908, a history of the National Insurance Fund (with income and expenditure accounts from 1949 to 2008 and projections to 2013), a profile of William Beveridge, Great Britain population profiles from 1901 to 2001 (and estimates to 2081), statistics on life expectancy and income distribution, and a good index.
This book is essential reading for anyone interested in the history and possible futures of the state pension in the UK. If policy-makers were to take its lessons to heart then perhaps the next time a Pensions Commission recommends careful study of a Citizen’s Pension (as the Pensions Commission did in 2005) there might be more chance of government ministers understanding why that would be a good idea.