View the article online at http://citywire.co.uk/money/article/a325643
The state pension: better with age?
The government says the basic state pension is worth four times more today than in 1909 when it was introduced. But a little bit of research might suggest otherwise.
Right at the very start of this year the Department for Work and Pensions put out a press release to celebrate the fact that the very first state pensions in the UK were paid out one hundred years ago on 1st January 1909.
It said in that press release that the basic state pension is apparently worth about four times more today than it was back in 1909 when it was introduced. That fact hit me when I first read it because I didn’t realise the state pension had gone up in value by so much (or even at all).
I am aware that any number of statistics and figures can be used to prove or disprove points, but it just bothered me that the view that the basic pension is worth four times as much as it was in 1909 is just so out of line with what I’ve always believed. So I decided to do what any dedicated pension historian ought to do in such a case and go back to see why I thought what I thought and also to see if I could check any historical sources while I’m at it; really just to put my mind at rest.
The first thing I did was to check out my ‘pension bible’. 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’. It was published in 1967 and is out of print these days (although I did manage to get a spare (and pristine) copy from an e-Bay bookstore last year).
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. So for the current basic state pension to be ‘worth’ four times that it seems to me it would have to be worth something like four-sixths (or 66.67%) of average earnings. I don’t think it is.
I checked out the latest stats on the National Statistics site and saw from there that median male earnings in the UK for full-time employees as of April 2008 are apparently £521 a week. That’s equivalent to £27,092 on an annual basis and feels about right with some other stuff I’ve read in the last year or so (I’ve had it in my head for a while that average earnings were around the £26,000pa mark).
Today’s state basic pension for a single person is £90.70 which is 17.4% of £521. If my figures there are right then it would mean today’s basic pension is worth about the same as it was to an average worker back in 1909, not four times as much.
But maybe average earnings were higher than thirty shillings a week in 1909? That could be where I’m going wrong with the numbers. There are probably loads of ways to find out for sure, but I just wanted to get a ‘feel’ for the figure so I started to trawl through some historical data.
I live out in Essex and so, for no other reason than that, I checked out the Suffolk and Essex Free Press newspaper archive for the year of 1909. One thing that hit me straight off was a report from the 6th of January 1909 that “Old Age Pensioners who were paid at Clare Post Office on Friday evening made many expressions of gratitude, one old man exclaimed, God bless the King, the Prime Minister and all who had to do with the procuring of pensions”. How about that? It’s contemporary evidence that at least one pensioner was happy with the outcome of the 1908 Act that’s for sure. But it doesn’t say much about average earnings levels (although I suppose it’s hard to imagine anyone getting so excited about a pension of only 4% of average earnings I suppose).
But then I read an article from October the 20th 1909 about a fatal accident at Brundon pit at Sudbury. A chap called Harry Hume (of Ballingdon) died in an accident at the pit and a claim was made under the then new Workmen’s Compensation Act. The report on the court proceedings stated “for three years before his death his average earnings were 15s a week”. So, if Gilling-Smith’s figures are right then Harry Hume would have been on about half of average earnings.
He wasn’t the only one either. I found another report from February 1909 about a labourer from Glemsford called Charles Boreham who was charged with neglecting his children. The newspaper report said “he earnt good wages (from 15s -16s 6d) a week by piece work during the last 6 months which is considerably above farm workers wages”.
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