May 12
The State Pension - Warning: Graphic Content

State pensions are a hot topic in this year’s general election campaign. Whether it’s the OECD suggesting that the state pension should be removed from the richest pensioners or Labour’s leaked manifesto proposing to compensate WASPI, in 2017 pensions are big news.

It may be hard to believe now, but pensions did not always wield such power. Since the introduction of state pensions through the Old Age Pensions Act 1908, the proportion of the UK population in receipt of a state pension has increased significantly. This change is illustrated below.

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The reason for the huge growth in the number of people in receipt of a state pension since its inception is two fold. Firstly, the UK state pension age has actually decreased since the introduction of the state pension. At the current time men can claim their UK state pension at age 65, and women at 63 and a half. In 1908 state pensions were only payable to people aged 70 or over. A state pension age of 70 looks high by modern standards, but this is especially true when you consider that life expectancy of those born in the 1910s was only 53! This leads us to the second reason for the growth in numbers – the dramatic increase in life expectancy seen during the 20th century. The graph below shows these changes between 1911 and 2011.

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Not only have the number of people in receipt of the state pension increased, the size of the state pension payments themselves have increased. Undoubtedly much of the increase is due to factors such as inflation. However, by comparing the size of the state pension at a point in time with the size of the average salary at the same point in time, it can be seen that the state pension is more generous in 2016 compared to 1909.

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As a result of these factors, UK Government expenditure on pensions has grown enormously over the last century, both in money terms and as a percentage of overall spending.

Gov Spend Pens 1.pngGov Spend Pens 2.png

 
The sheer size of the state pension payroll now means decisions on pensions policy have huge monetary ramifications, which goes some way to explaining why pensions are such a hot topic in 2017. Despite these ever increasing costs, few political party policies involve a reduction of pensioner benefits, which the party representatives say indicates their caring principles. For the more cynically minded, it may be that the reasons have more to do with the demographic information shown in the graph below rather than any particular concern for the elderly.
 
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All data is taken from ons.gov.uk, gov.uk or parliament.uk except where otherwise stated.

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