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Posted 21 March 2018

Roman armies, penny premiums and retirement: the pension timeline

This year marks the 175th anniversary of the mutual society now known as LV=. To celebrate, we take a look back at how the concept of supporting people in later life, especially with a pension, has changed through the years.

  • How ‘mutual societies’ have played their part
  • What have the Romans ever done for us?
  • Why longer life expectancies are changing the landscape

On 3 March 1843, a 36-year-old Liverpool customs officer called William Fenton had an idea that was to change the way society supports people. In those days, Liverpool was a city of huge contrasts. If someone from a poor family had an accident at work or fell victim to disease, being able to bury them with dignity wasn’t an option.

William’s idea was simple: door-to-door agents would collect penny premiums, allowing families to afford a decent funeral. The idea of a ‘mutual society’ proved hugely successful, and the organisation that eventually became LV= went from strength to strength – moving into pensions as well as other forms of insurance along the way.

Retirement today would be unimaginable without pensions to rely upon. But the concept is older than you’d think.

The Roman Emperor Augustus rose to power by hiring a private army. To stay there, he needed to keep those soldiers on side. His idea was to offer a pension, or praemium, which is ‘prize’ or ‘reward’ in Latin – a lump sum equivalent to 12 years’ salary.

1853 Steam train on a railway with workers

Company pensions get on track

The first UK pensions were awarded to Royal Naval Officers back in 1666, but they (literally) gathered a head of steam in Victorian times when railway companies began paying pensions from 1853. A 2.5% members contribution was matched by their employers – a mechanism still used today.

From 1874, former nurses were paid £15 annually. Similar schemes for civil servants, teachers and police followed, along with major employers such as Reuters, WHSmith and Colmans. But most working people had little or no financial security in later life.

The birth of the State Pension

Germany was first to adopt an old-age social insurance programme in 1889. In Britain the breakthrough came in 1908, the Old Age Pensions Act heralding a modest, non-contributory pension of between 1 and 5 shillings a week (10p - 25p) for individuals and 7s 6d (37.5p) for couples ‘of good character’, aged 70 and over. At a time when average life expectancy was just 47, only 600,000 people qualified.

The 1921 Finance Act introduced tax relief on pension contributions, encouraging more employers to set up pension funds. It was followed by a State Pension scheme in 1925, giving male manual workers earning less than £250 a year an extra 10 shillings weekly from the age of 65. Women were included from 1940.

1925 image of a woman and man

It was not until 1948 that the universal compulsory State Pension arrived – then, though, designed as a safety net rather than guaranteeing a comfortable retirement.

Post war, employers needed to attract and retain workers, and so began the boom time for company pensions: by 1967, eight million employees were covered, along with four million public sector staff. From 1978, those without access to a company scheme could pay into the State Earnings Related Pension Scheme (Serps).

Other important changes came in 1985, when companies became obliged to provide inflation-proof pensions, and in 1989, when they were made to pay pensions to men at the same age as women. Part-timers were also brought into the pensions fold.

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Triple lock, freedoms and auto-enrolment

The decision in 1980 to remove the link between State Pensions and earnings saw their value gradually slide. In 2003, the Pension Credit was introduced, topping up the income of the poorest pensioners. The link was finally reconnected by the ‘triple lock’ in 2011.

Today, pensions continue adapting to a changing world. The process of levelling the State Pension ages of men and women began in 2010, with both ages set to rise in the future.

Pensions freedoms, brought in for the 2015/16 tax year, allow anyone aged 55 and over to move their funds for a better return.

The government has also introduced auto-enrolment, covering increasing numbers of people in smaller companies, while, in 2016, the new ‘flat-rate’ pension signalled a higher basic level.

Why saving for a pension has never been more important

One family’s experience over the last four generations highlights some of the pension perils of the past – and why saving for the future remains as important as ever.

Keith Bishop, now 86, readily agrees he is fortunate to have several occupational pensions as well as a State Pension, allowing him to live comfortably in retirement.

‘I was even able to retire early,’ he says, ‘so my pensions have been paying me for 25 years. I have many friends who rely on the State Pension, which is only ever a very limited safety net.

‘My father worked hard all his life and managed to put together a pension, but two weeks after he retired, he suffered a fatal heart attack. My mother was left in a very difficult financial position as his pension wasn’t transferable.

‘In my early working days, I spent nine years with a Canadian company who then went into liquidation. Their pension fund wasn't protected as they are today and I lost nine years of contributions, while others lost many more – some were coming up to retirement too.

‘Thank goodness we now have proper protection for private and company pensions.

‘We’re all living much longer, making it vital to save and not rely on the State Pension. And while my son has sorted out his retirement, I do worry about my grandchildren’s generation. The priority now is getting your foot on the housing ladder, and that’s understandable, but saving for your retirement, whatever your age, is crucial too.’

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Explore Love Retirement

Contact an LV= Pension Specialist on

0800 022 3961

Lines open: 8.30am to 6pm Monday to Friday. We will record and/or monitor calls for training and audit purposes.

We offer a range of the pension and investment products from the Liverpool Victoria group of companies. We also offer investment products from a limited number of other companies, and annuity products from the whole of the market.

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