1 January 1909, First State Pension paid in the UK
On 1st January 1909, the first state pension was paid in the UK.
The subject of pensions has been almost ubiquitous over recent years. Numerous changes to the UK’s retirement rules, coupled with a stream of press coverage hammering home the notion that we as a nation, need to save more, have ensured this.
The UK pensions industry can actually trace its roots back to the 16th century, when the Chatham Chest - a fund set-up to provide for disabled seamen - was established. Thereafter retirement funding endured a slow but gradual evolution via the establishment of friendly societies.1 But it wasn’t until 1908, when the UK government passed the Old Age Pensions Act, that the first official general old age pension was introduced. And on New Year’s Day, 1909, the very first state pension was paid in the UK – 110 years ago today.1 It paid out five shillings a week to people over the age of 70 who met certain requirements. But those earning an annual income of more than £31.50 were ineligible. Notably at the time, life expectancy was circa 50 years for men and 53 for women – well behind the current trends of approximately 79 and 83 years. 2
Read more: The triumph of longevity
The good news is that these days we are all living longer. From a retirement planning perspective, however, this situation has thrown-up a number of issues, not least how do we ensure that we will have enough money to ensure a comfortable retirement?
This issue has been made even more challenging with the demise of final salary schemes. After all, under the New State Pension rules, the maximum you can currently get is £164.35 per week.3 As such, relying on the Government alone is unlikely to see you comfortably through your retirement years. However in bid to get people saving more, the Pensions Act 2008 ushered in auto-enrolment, whereby every UK employer has to put certain staff into a workplace pension scheme and contribute towards it.4 The initiative began to roll-out in 2012 and it was understandably welcomed, as it essentially made workers save for retirement, although people can opt out if they wish.
But perhaps the real revolution occurred in 2014, when the then Chancellor of the Exchequer, George Osborne, announced he was going to free retirees from the shackles of having to ultimately purchase an annuity with their pension pot. From April the following year, anyone aged 55 plus, could access their pension and do as they wished with their nest-egg. At the time, fears of people blowing their life’s savings dominated the headlines but the reality was perhaps not as dramatic. Numbers suggest that in the initial years following the introduction of the new rules, annuity sales declined while the move to income drawdown, where savers take control and remain invested, increased in popularity.5
But given that the consensus view is that we all need to save more and take greater responsibility for our pension, the freedoms mean savers will need to think longer-term, and get their cash working as hard as possible, especially because interest rates could potentially remain in the doldrums for some time. Ultimately, the freedoms mean we’re all fund managers now.
5ABI (page 20/21)
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