It is very interesting how we all quickly adapt a situation as the “norm” and we have done this wholeheartedly with the idea of retirement. This is the first of three articles on whether retirement as we know it will survive.

If we go back into history to the Old Age Pensions Act 1908, The Widows, Orphans and Old Age Contributory Pensions Act 1925 and finally the National Insurance Act of 1946(which introduced the Basic State Pension in 1948) these Acts were passed to provide income which would be a safety net against old age poverty These were not pension plans on which you funded cruises and trips to Australia but simply a State plan which  gave you a minimum income when you could no longer work because of old age. In those days nothing was expected of retirement – it was simply a time when because of age or poor health you could work no more and most people were forced to lead a simple life for the last few remaining years of their lives. Remember many of them had been engaged in heavy industry and were physically worn out.

The 1950s brought a huge change to the concept of retirement with the introduction of the employer sponsored pension scheme. This was usually a final salary scheme which provided an income in retirement based on the number of years in the scheme and the final earnings of the employee. This provided a good income in retirement with the added benefit that usually the income increased in payment and on the death of the member, his or her spouse inherited a pension. Frequently these schemes had normal retirement ages of 60 or 63, some had bridging pensions to age 65.The bridging pension worked as follows:  if you were a member of a scheme with a retirement age of 63 then for two years the occupational scheme would pay you an additional pension equivalent to the state pension. When you reached age 65 the occupational pension reduced by an amount equivalent to the State Pension

In the 1970s and 1980s people started to retire from these schemes with reasonable levels of pension over and above the State Pension – retirement now became a lot more fun, the retiree had money to spend on weekends away and trips abroad.

The situation was further improved by the fact that the final salary pension schemes were fully funded and in many cases in surplus. This led employers to offer employees early retirement packages without penalty. This was a cost effective method of staff reduction for employers who were attempted to thin down the workforce due in part to the introduction of computerisation. Perfectly healthy people were now retiring in their mid-fifties, buying cheap property in Spain and having the time of their lives. They had never had it so good.

As a nation we had all looked at what was going on and said yes retirement is fun and I think I am entitled to a bit of this without thinking about how we were to get it – we all assumed that someone else would provide it for us, perhaps that employers would continue to run these generous schemes and that Government would also provide because by now the Government had moved away from the flat basic state pension introduced by Beveridge and was moving to top this up with an earnings related element. We thought that everything was set fair but as usual we did not take into account the changing social and economic environment.