![People and households without private pensions](https://upload.wikimedia.org/wikipedia/commons/2/2d/People_and_households_without_private_pensions.png)
Pensions in the United Kingdom, whereby United Kingdom tax payers have some of their wages deducted to save for retirement, can be categorised into three major divisions - state, occupational and personal pensions.
The
state
State may refer to:
Arts, entertainment, and media Literature
* ''State Magazine'', a monthly magazine published by the U.S. Department of State
* ''The State'' (newspaper), a daily newspaper in Columbia, South Carolina, United States
* ''Our S ...
pension is based on years worked, with a 35-year work history yielding a pension of £185.15 per week. It is linked to wage and price increases. Most employees and the self-employed are also enrolled in employer-subsidised and tax-efficient occupational and personal pensions which supplement this basic state-provided pension.
Historically, the "Old Age Pension" was introduced in 1909 in the United Kingdom (which included all of Ireland at that time). Following the passage of the
Old-Age Pensions Act 1908
The Old-Age Pensions Act 1908 is an Act of Parliament of the United Kingdom of Great Britain and Ireland, passed in 1908. The Act is often regarded as one of the foundations of modern social welfare in both the present-day United Kingdom and the ...
a pension of 5 shillings per week (25p, equivalent, using the
Consumer Price Index
A consumer price index (CPI) is a price index, the price of a weighted average market basket of consumer goods and services purchased by households. Changes in measured CPI track changes in prices over time.
Overview
A CPI is a statistica ...
, to £ in present-day terms), or 7s.6d per week (equivalent to £/week today) for a married couple, was payable to persons with an income below £21 per annum (equivalent to £ today), The qualifying age was 70, and the pensions were subject to a
means test. The age of eligibility was moved to 65 for men and 60 for women, but from April 2010, the age for women is gradually being harmonised to match that for men, and the retirement age for both men and women is increasing to 68, based on date of birth, and by no later than 2046.
History
![Betrayed Again](https://upload.wikimedia.org/wikipedia/commons/0/0c/Betrayed_Again.jpg)
Until the 20th century, poverty was seen as a quasi-criminal state, and this was reflected in the
Vagabonds and Beggars Act 1494
The Vagabonds and Beggars Act 1494 (11 Henry VII c.2) was an Act of Parliament passed during the reign of Henry VII. The Act stated that "vagabonds, idle and suspected persons shall be set in the stocks for three days and three nights and have n ...
that imprisoned beggars. In Elizabethan times,
English Poor Laws
The English Poor Laws were a system of poor relief in England and Wales that developed out of the codification of late-medieval and Tudor-era laws in 1587–1598. The system continued until the modern welfare state emerged after the Second World ...
represented a shift whereby the poor were seen merely as morally degenerate, and were expected to perform forced labour in
workhouse
In Britain, a workhouse () was an institution where those unable to support themselves financially were offered accommodation and employment. (In Scotland, they were usually known as poorhouses.) The earliest known use of the term ''workhouse'' ...
s.
The beginning of the modern state pension was the
Old-Age Pensions Act 1908
The Old-Age Pensions Act 1908 is an Act of Parliament of the United Kingdom of Great Britain and Ireland, passed in 1908. The Act is often regarded as one of the foundations of modern social welfare in both the present-day United Kingdom and the ...
, which provided 5 shillings (£0.25) a week for those over age 70 whose annual means did not exceed £31 10s. (£31.50). It coincided with the
Royal Commission on the Poor Laws and Relief of Distress 1905–1909 and was the first step in the
Liberal welfare reforms
The Liberal welfare reforms (1906–1914) were a series of acts of social legislation passed by the Liberal Party after the 1906 general election. They represent the emergence of the modern welfare state in the United Kingdom. The reforms demons ...
towards the completion of a system of social security, with unemployment and health insurance through the
National Insurance Act 1911
The National Insurance Act 1911 created National Insurance, originally a system of health insurance for industrial workers in Great Britain based on contributions from employers, the government, and the workers themselves. It was one of the foun ...
.
In the early 20th century, occupational (workplace) pension schemes started to become more common, with one driver being the Finance Act 1921 which provided tax-relief on pension scheme contributions.
After the Second World War, the
National Insurance Act 1946
The National Insurance Act 1946 (c 67) was a British Act of Parliament passed during the Attlee ministry which established a comprehensive system of social security throughout the United Kingdom.
The act meant that all who were of working age we ...
completed universal coverage of social security. The
National Assistance Act 1948
The National Assistance Act 1948 is an Act of Parliament passed in the United Kingdom by the Labour government of Clement Attlee. It formally abolished the Poor Law system that had existed since the reign of Elizabeth I, and established a social ...
formally abolished the poor law, and gave a minimum income to those not paying National Insurance. The Basic State Pension was also introduced in 1948. Occupational pension schemes also flourished after the Second World War, with pensions becoming a key tool to attract and retain staff.
In the second half of the 20th century, there was a succession of legislative changes to protect pension scheme members, prevent abuse of the generous tax-reliefs available and prevent fraudulent activity. Some of these changes were precipitated by
Robert Maxwell's plundering of the Mirror Pension Funds.
This led to the
Goode Report {{Short description, Government issued inquiry
''Pension Law Reform'' (1993) Cm 2342, also known as the Goode Report after its leading author, Roy Goode, was a UK government commissioned inquiry into the state of pensions in the United Kingdom, whic ...
, whose recommendations were implemented by comprehensive statutes in the
Pension Schemes Act 1993
The Pension Schemes Act 1993c 48 is a United Kingdom Act of Parliament that concerns the administration of occupational pensions.
Background
The Pension Schemes Act 1993 was the first statute to result from the comprehensive inquiry led by Roy ...
and the
Pensions Act 1995
The Pensions Act 1995c 26 is a piece of United Kingdom legislation to improve the running of pension schemes.
Background
Following the death of Robert Maxwell, it became clear that he had embezzled a large amount of money from the pension fund ...
.
The early 1990s established the existing framework for state pensions in the
Social Security Contributions and Benefits Act 1992
Social organisms, including human(s), live collectively in interacting populations. This interaction is considered social whether they are aware of it or not, and whether the exchange is voluntary or not.
Etymology
The word "social" derives from ...
and
Superannuation and other Funds (Validation) Act 1992.
In 2002 the
Pensions Commission was established as a cross-party body to review pensions in the United Kingdom. The first Act to follow was the
Pensions Act 2004
The Pensions Act 2004 (c 35) is an Act of the Parliament of the United Kingdom to improve the running of pension schemes.
Background
In the years following the introduction of the Pensions Act 1995, it was widely perceived that it was failing ...
, which updated regulation by replacing the
Occupational Pensions Regulatory Authority
The Pensions Regulator (TPR) is a non-departmental public body which regulates work-based pension schemes in the United Kingdom. Created under the Pensions Act 2004, the regulator replaced the Occupational Pensions Regulatory Authority (OPRA) fr ...
(OPRA) with the
Pensions Regulator
The Pensions Regulator (TPR) is a non-departmental public body which regulates work-based pension schemes in the United Kingdom. Created under the Pensions Act 2004, the regulator replaced the Occupational Pensions Regulatory Authority (OPRA) fro ...
and relaxing the stringency of minimum funding requirements for pensions, while ensuring protection for insolvent businesses. In a major update of the state pension, the
Pensions Act 2007 aligned and raised retirement ages. Since then, the
Pensions Act 2008 has set up automatic enrolment for
occupational pensions
A pension (, from Latin ''pensiō'', "payment") is a fund into which a sum of money is added during an employee's employment years and from which payments are drawn to support the person's retirement from work in the form of periodic payments ...
, and a public competitor designed to be a low-cost and efficient fund manager, called the
National Employment Savings Trust
The National Employment Savings Trust (Nest) is a defined contribution workplace pension scheme in the United Kingdom. It was set up to facilitate automatic enrolment as part of the government's workplace pension reforms under the Pensions Act 2 ...
(or "Nest").
Meanwhile, since the turn of the century there has been significant decline in the provision of
defined benefit
Defined benefit (DB) pension plan is a type of pension plan in which an employer/sponsor promises a specified pension payment, lump-sum, or combination thereof on retirement that depends on an employee's earnings history, tenure of service and age, ...
pensions in the private sector, with
money purchase arrangements increasingly being used for new benefit accrual.
Pensions Act 2011
![Pensions strike Aldwych](https://upload.wikimedia.org/wikipedia/commons/8/81/Pensions_strike_Aldwych.jpg)
The Act amended the timetable for increasing the state pension age to 66. Under the Pensions Act 2007, the increase to 66 was due to take effect between 2024 and 2026. This Act brought forward the increase, so that state pension age for both men and women began rising from 65 in December 2018 and reached 66 in October 2020. As a result of bringing forward the increase to 66, the timetable contained in the Pension Act 1995 for equalising women's and men's state pension ages at 65 by April 2020 was be accelerated, so that the women's state pension age reached 65 in November 2018.
The Act introduced amendments to primary legislation to amend the regulatory framework for the duty on employers to automatically enrol eligible workers into a qualifying pension scheme and to contribute to the scheme. These measures implemented recommendations from the ''Making Automatic Enrolment Work'' review and revised some of the automatic enrolment provisions in the Pensions Act 2008.
The Act amended existing legislation that provided for revaluation or indexation of occupational pensions and payments by the Pension Protection Fund.
The Act defined "money purchase benefits" for the purpose of pensions law. This was a consequence of the judgment of the Supreme Court in ''
Houldsworth v Bridge Trustees and Secretary of State for Work and Pensions''. The Act took powers to make transitional, consequential or supplementary provision as well and to make further amendments to the definition of "money purchase benefits".
The Act introduced provisions into the current judicial pension schemes to allow contributions to be taken towards the cost of providing personal pension benefits to members of those schemes.
The Act also contained a number of measures to correct particular references in the existing body of pensions-related legislation and other small and technical measures to both state and private pension legislation. This included the following measures:
*increased flexibility in the date of consolidation of additional state pension;
*abolition of new awards of Payable Uprated Contracted-out Deduction Increments (PUCODIs);
*Financial Assistance Scheme: amendments to legislation concerning transfer of assets, and amount of payments;
*miscellaneous amendments to Pension Protection Fund legislation;
*amendments to legislation concerning payments of surplus to employers;
*amendments to legislation concerning the requirement for indexation of cash balance benefits; and
*corrective amendments to legislation concerning the calculation of debt owing to a pension scheme.
State pensions
State pension comprises three main elements – the basic pension, additional pensions, and pension guarantee. These are described in the following sections.
Basic State Pension (BSP) or State Retirement Pension
Additional Pension
Three different state schemes have existed to provide extra pension provision above the Basic State Pension (BSP). These are collectively known as Additional Pension. They have been available only to employees paying National Insurance contributions and to certain exempted groups (not including the self-employed). The three schemes are/were:
*
Graduated Pension or Graduated Retirement Benefit: This was earned between 6 April 1961 and 5 April 1975. Qualification was based on payment of a number of fixed National Insurance payments ('stamps'). Graduated pension typically pays a small amount (£1 or so per week) to those entitled to it.
*
State Earnings-Related Pension Scheme (SERPS): SERPS ran from 6 April 1978 to 5 April 2002. As the name implies, the level of pension payable was related to earnings via the amount of National Insurance contributions. Qualification was based on ''band earnings'' above a Lower Earnings Limit (LEL) in each year. The LEL (£84 per week /£4368 pa in 2006/07) was usually set at the same level as the BSP (£84.25) and increased when BSP did. Band earnings were those between the LEL and an Upper Earnings Limit (UEL) at which National Insurance contributions ceased to be payable by the employee (this was £645 per week/£2,795 per month in 2006/07, although the UEL now refers to a threshold where reduced NI payments are made, as opposed to payment ceasing). The UEL is also adjusted annually.
*
State Second Pension (S2P): S2P was introduced on 6 April 2002. As with SERPS, the level of pension payable is related to the recipient's earnings via their National Insurance contributions. Qualification is based on earnings at, or above, the LEL, but no band earning calculation is made until earnings reach a higher base (£12,500 pa in 2006/07) called the Lower Earnings Threshold (LET). Earnings below the LET (but above the LEL) are credited up to the LET.
Unlike the Basic State Pension, participation in the Additional Pension schemes is voluntary. Those who do not wish to participate can
contract out. This option was introduced with SERPS in 1978 and is only available to those who have made alternative pension arrangements through Personal or Occupational schemes. Further changes to be introduced in 2012 will see S2P change from an "earnings related" to a "flat rate" pension, and individuals will lose the right to contract out.
Pension Credit
Occupational pensions
Occupational pension schemes are arrangements established by employers to provide pension and related benefits for their employees. These are created under the
Pension Schemes Act 1993
The Pension Schemes Act 1993c 48 is a United Kingdom Act of Parliament that concerns the administration of occupational pensions.
Background
The Pension Schemes Act 1993 was the first statute to result from the comprehensive inquiry led by Roy ...
, the
Pensions Act 1995
The Pensions Act 1995c 26 is a piece of United Kingdom legislation to improve the running of pension schemes.
Background
Following the death of Robert Maxwell, it became clear that he had embezzled a large amount of money from the pension fund ...
and the
Pensions Act 2008.
Automatic enrolment
The
Pensions Act 2008 is an
Act of the Parliament of the United Kingdom
In the United Kingdom an act of Parliament is primary legislation passed by the Parliament of the United Kingdom.
An act of Parliament can be enforced in all four of the UK constituent countries (England, Scotland, Wales and Northern Irelan ...
. The principal change brought about by the Act is that all workers will have to opt out of an occupational pension plan of their employer, rather than opt in. This is referred to as automatic enrolment, and moves a significant amount of responsibility onto the employer to ensure that their employees are enrolled in a workplace pension scheme. Research based on ONS labour market data has found that partly due to the equalisation of the state pension age, women are driving employment growth in the UK and that the number of females over 65 has doubled in the past 10 years.
Employers were required to initiate automatic enrolment into their workplace according to set staging dates based on the number of employees in the company. These dates varied from 1 January 2012 to 1 January 2017, with larger firms required to meet compliance guidelines first, and smaller firms later. There were penalties for companies who are not compliant by their staging date. There are a number of solutions available to help companies meet government compliance by their staging date, an example of this would be NEST which was set up by the government.
Between the introduction of auto enrolment and April 2016, "the overall proportion of eligible employees saving into a workplace pension increased from 55% to 78%" with the largest increases found in the private sector.
Defined benefit/final salary schemes
Defined benefit schemes are pension schemes which provide a defined (i.e. guaranteed) level of benefit, such as "1/60 of your salary at retirement for each year of service". In such an arrangement, the employee was typically promised a pension of a fixed proportion of their salary in the period leading up to retirement or as an average of earnings over their career. The proportion would depend on the number of years of service with the employer. Post retirement increases are typically partly discretionary, however, must comply with statutory minimums.
These schemes were common place in the second half of the 20th century (and are still used in the public sector), but declined significantly at the start of the 21st century in the private sector as the costs associated with these schemes increased substantially. These cost increases were driven by various factors, including an increase in life expectancy, the
dot-com bubble
The dot-com bubble (dot-com boom, tech bubble, or the Internet bubble) was a stock market bubble in the late 1990s, a period of massive growth in the use and adoption of the Internet.
Between 1995 and its peak in March 2000, the Nasdaq Compo ...
bursting, a reduction in
bond yield
In finance, a bond is a type of security under which the issuer (debtor) owes the holder (creditor) a debt, and is obliged – depending on the terms – to repay the principal (i.e. amount borrowed) of the bond at the maturity date as well as ...
s and increasing regulation.
More than 6,000 defined benefit occupational schemes were in place in the UK in 2015,
of which over 5000 were in deficit. The total shortfall of the schemes was over 360 billion pounds as of February 2015.
Defined contribution/money purchase schemes
Over recent years, many employers have closed their defined benefit schemes to new members, and established
defined contribution
A defined contribution (DC) plan is a type of retirement plan in which the employer, employee or both make contributions on a regular basis. Individual accounts are set up for participants and benefits are based on the amounts credited to these a ...
or
money purchase arrangements instead. In this arrangement, the employer (and sometimes also the employee) makes regular payments (typically a percentage of salary) into a pension fund, and the fund is used to buy a pension when the employee retires. So the amount of pension depends on a number of factors including the accumulated amount of the fund, interest rates and projected mortality rates at the time the individual retires.
Funding
UK occupational pension schemes are typically jointly funded by the employer and the employees. These are called "contributory pension schemes" since the employee contributes. "Non contributory pension schemes" are where the employer funds the scheme with no contribution from the individual. Contributions are put into a separate
trust
Trust often refers to:
* Trust (social science), confidence in or dependence on a person or quality
It may also refer to:
Business and law
* Trust law, a body of law under which one person holds property for the benefit of another
* Trust (bus ...
, whose assets will be used to provide benefits in due course.
Underfunding
Defined benefit pension schemes may be affected to swings in the financial markets. The
Pension Protection Fund
The 'Pension Protection Fund'' (PPF) is a statutory corporation, set up by the Pensions Act 2004, and has been protecting members of eligible defined benefit (DB) pension schemes across the United Kingdom since 2005. It protects close to 10 milli ...
was set up to act as a safety net in case a scheme was unable to pay the defined benefits it was committed to. According to the PPF, pension funds in the UK are estimated to have been £367.5 billion in deficit at the end of January 2015. The report
puts the deficit at 40%. The PPF figures show that the funds fell into overall deficit at the end of 2011. The situation of the schemes is driven largely by
quantitative easing
Quantitative easing (QE) is a monetary policy action whereby a central bank purchases predetermined amounts of government bonds or other financial assets in order to stimulate economic activity. Quantitative easing is a novel form of monetary pol ...
. By December 2019 the PPF estimated the total deficit of all pension funds in the U.K. to be £35.4 billion.
Tax registration
Most schemes are also registered for tax purposes, which gives the scheme various tax advantages—assets grow free from income tax, capital gains tax and corporation tax, employees can normally make contributions out of their gross (untaxed) income, and employer contributions are generally tax deductible. Only funded schemes can be registered.
Prior to April 2006 schemes were 'approved' by
HMRC
, patch =
, patchcaption =
, logo = HM Revenue & Customs.svg
, logocaption =
, badge =
, badgecaption =
, flag =
, flagcaption =
, image_size =
, co ...
rather than registered. Approval placed certain limits on the benefits which could be provided, which led to a growth of 'unapproved' (i.e. without the generous tax treatment) retirement arrangements—these unapproved schemes were commonly distinguished by reference to their funding status (
funded unapproved retirement benefit schemes
Funding is the act of providing resources to finance a need, program, or project. While this is usually in the form of money, it can also take the form of effort or time from an organization or company. Generally, this word is used when a firm uses ...
FURBS and
unfunded unapproved retirement benefit schemes UURBS).
Individual or personal pensions
It is also possible for an individual to make contributions under an arrangement they themselves make with a provider (such as an insurance company). Similar tax advantages will usually be available as for occupational schemes. Contributions are typically invested during an individual's working life, and then used to purchase a pension at or following retirement. Various names are given to different types of individual arrangement, but they are not fundamentally different in nature. The generic term
personal pension
A personal pension scheme (PPS), sometimes called a personal pension plan (PPP), is a UK tax-privileged individual investment vehicle, with the primary purpose of building a capital sum to provide retirement benefits, although it will usually also ...
is used to refer to arrangements established since the rules were liberalised in the 1980s (earlier arrangements are usually called
retirement annuity contracts), but can be subdivided into other types (such as the
self-invested personal pension
A self-invested personal pension (SIPP) is the name given to the type of UK government-approved personal pension scheme which allows individuals to make their own investment decisions from the full range of investments approved by HM Revenue and C ...
, where the member is allowed to direct what their contributions should be invested in).
Stakeholder pensions
Stakeholder pensions (insured personal pensions, with charges capped at a low level) are a form of pension arrangement designed to be easily understandable and available. Stakeholder pensions are in effect personal pension schemes set up on terms which meet standards set by the government (for example there are restrictions on the charges the provider may make). Although a stakeholder pension is a personal pension, they can (and in some circumstances must) be offered by an employer as a cost-effective way of providing pension cover for their workforce.
Group personal pensions
Group personal pensions are another pension arrangement that are personal pensions, but are linked to an employer. A group personal pension plan (GPPP) can be established by an employer as a way of providing all of its employees with access to a pension plan run by a single provider. By grouping all the employees together in this way, it is normally possible for the employer to negotiate favourable terms with the provider, thus reducing the cost of pension provision to the employees. The employer will also normally contribute to the GPPP.
SIPPs
Special categories of pension
Perpetual or hereditary pensions
Perpetual pensions were freely granted either to favourites or as a reward for political services from the time of
Charles II onwards. Such pensions were very frequently attached as salaries to places which were sinecures, or, just as often, posts which were really necessary were grossly overpaid, while the duties were discharged by a deputy at a small salary.
Prior to the reign of
Queen Anne, such pensions and annuities were charged on the hereditary revenues of the sovereign and were held to be binding on the sovereign's successors. By the
Taxation, etc. Act 1702 (I Anne c. 7) it was provided that no portion of the hereditary revenues could be charged with pensions beyond the life of the reigning sovereign. This act did not affect the hereditary revenues of Ireland and Scotland, and many persons were quartered, as they had been before the act, on the Irish and Scottish revenues who could not be provided for in England for example, the
Duke of St Albans
Duke of St Albans is a title in the Peerage of England. It was created in 1684 for Charles Beauclerk, 1st Earl of Burford, then 14 years old. King Charles II had accepted that Burford was his illegitimate son by Nell Gwyn, an actress, and aw ...
,
illegitimate
Legitimacy, in traditional Western common law, is the status of a child born to parents who are legally married to each other, and of a child conceived before the parents obtain a legal divorce. Conversely, ''illegitimacy'', also known as ''b ...
son of Charles II, had an Irish pension of £800 a year ();
Catherine Sedley, mistress of
James II, had an Irish pension of £5,000 a year; the
Duchess of Kendall and the
Countess of Darlington, respectively mistress and half-sister of
George I George I or 1 may refer to:
People
* Patriarch George I of Alexandria (fl. 621–631)
* George I of Constantinople (d. 686)
* George I of Antioch (d. 790)
* George I of Abkhazia (ruled 872/3–878/9)
* George I of Georgia (d. 1027)
* Yuri Dolgor ...
, had pensions of the united annual value of £5,000 (), while
Madame de Wallmoden, a mistress of
George II George II or 2 may refer to:
People
* George II of Antioch (seventh century AD)
* George II of Armenia (late ninth century)
* George II of Abkhazia (916–960)
* Patriarch George II of Alexandria (1021–1051)
* George II of Georgia (1072–1089)
* ...
, had a pension of £3,000 ().
These pensions had been granted in every conceivable form during the pleasure of
the Crown
The Crown is the state in all its aspects within the jurisprudence of the Commonwealth realms and their subdivisions (such as the Crown Dependencies, overseas territories, provinces, or states). Legally ill-defined, the term has different ...
, for the life of the sovereign, for terms of years, for the life of the grantee, and for several lives in being or in reversion. On the accession of
George III
George III (George William Frederick; 4 June 173829 January 1820) was King of Great Britain and of Ireland from 25 October 1760 until the union of the two kingdoms on 1 January 1801, after which he was King of the United Kingdom of Great Br ...
and his surrender of the hereditary revenues in return for a fixed civil list, this
civil list
A civil list is a list of individuals to whom money is paid by the government, typically for service to the state or as honorary pensions. It is a term especially associated with the United Kingdom and its former colonies of Canada, India, New Zeal ...
became the source from which the pensions were paid. The three pension lists of England, Scotland and Ireland were consolidated in 1830, and the civil pension list reduced to finance the remainder of the pensions being charged on the
Consolidated Fund
In many states with political systems derived from the Westminster system, a consolidated fund or consolidated revenue fund is the main bank account of the government. General taxation is taxation paid into the consolidated fund (as opposed ...
.
In 1887
Charles Bradlaugh
Charles Bradlaugh (; 26 September 1833 – 30 January 1891) was an English political activist and atheist. He founded the National Secular Society in 1866, 15 years after George Holyoake had coined the term "secularism" in 1851.
In 1880, Brad ...
MP protested strongly against the payment of perpetual pensions, and as a result a committee of the
House of Commons
The House of Commons is the name for the elected lower house of the bicameral parliaments of the United Kingdom and Canada. In both of these countries, the Commons holds much more legislative power than the nominally upper house of parliament. ...
inquired into the subject. An appendix to the Report contains a detailed list of all hereditary pensions, payments and allowances in existence in 1881, with an explanation of the origin in each case and the ground of the original grant; there are also shown the pensions, etc., redeemed from time to time, and the terms upon which the redemption took place. The nature of some of these pensions may be gathered from the following examples:
* To the
Duke of Marlborough
General (United Kingdom), General John Churchill, 1st Duke of Marlborough, 1st Prince of Mindelheim, 1st Count of Nellenburg, Prince of the Holy Roman Empire, (26 May 1650 – 16 June 1722 Old Style and New Style dates, O.S.) was an Engl ...
and his heirs in perpetuity, £4,000 per annum; this annuity was redeemed in August 1884 for a sum of £107,780, by the creation of a ten years annuity of £12,796 17s. per annum.
* By an act of 1806 an annuity of £5,000 per annum was conferred on
Lord Nelson
Vice-admiral (Royal Navy), Vice-Admiral Horatio Nelson, 1st Viscount Nelson, 1st Duke of Bronte (29 September 1758 – 21 October 1805) was a British people, British flag officer in the Royal Navy. His inspirational leadership, grasp of strate ...
and his heirs in perpetuity.
* In 1793 an annuity of £2,000 was conferred on
Lord Rodney
Baron Rodney, of Rodney Stoke in the County of Somerset, is a title in the Peerage of Great Britain. It was created in 1782 for the naval commander Sir George Brydges Rodney, 1st Baronet. He had previously been created a Baronet, of Alresford i ...
and his heirs.
All these pensions were for services rendered, and although justifiable from that point of view, a preferable policy is pursued in the 20th century, by Parliament voting a lump sum, as in the cases of
Lord Kitchener in 1902 (£50,000) and
Lord Cromer
Earl of Cromer is a title in the Peerage of the United Kingdom, held by members of the Baring family, of German descent. It was created for Evelyn Baring, 1st Viscount Cromer, long time British Consul-General in Egypt. He had already been cr ...
in 1907 (£50,000).
Charles II granted the office of Receiver-General and Controller of the Seals of the Court of Kings Bench and Common Pleas to the
Duke of Grafton
Duke of Grafton is a title in the Peerage of England. It was created in 1675 by Charles II of England for Henry FitzRoy, his second illegitimate son by the Duchess of Cleveland. The most notable duke of Grafton was Augustus FitzRoy, 3rd Duke ...
. This was purchased in 1825 from the duke for an annuity of £843, which in turn was commuted in 1883 for a sum of £22,714 12s. 8d. To the same duke was given the
Office of the Pipe or
Remembrancer of First-Fruits and Tenths of the Clergy. This office was sold by the duke in 1765 and, after passing through various hands, was purchased by one R. Harrisor in 1798. In 1835 on the loss of certain fees the holder was compensated by a perpetual pension of £62 9s. 8d. The Duke of Grafton also possessed an annuity of £6,870 in respect of the commutator of the dues of
butlerage
A butlerage was a duty of two shillings on every ton of wine imported into England
England is a country that is part of the United Kingdom. It shares land borders with Wales to its west and Scotland to its north. The Irish Sea lies no ...
and
prisage.
To the
Duke of St Albans
Duke of St Albans is a title in the Peerage of England. It was created in 1684 for Charles Beauclerk, 1st Earl of Burford, then 14 years old. King Charles II had accepted that Burford was his illegitimate son by Nell Gwyn, an actress, and aw ...
was granted in 1684 the office of
Master of the Hawks. The sum granted by the original patent were: Master of Hawks, salary £391 1s. 5d.; four falconers at £50 per annum each, £200; provision of hawks, £600; provision of pigeons, hens and other meats £182 10s.; total, £1373 11s. 5d. This amount was reduced by office fees and other deductions to £965, at which amount it stood until commuted in 1891 for £18,335.
To the
Duke of Richmond
Duke of Richmond is a title in the Peerage of England that has been created four times in British history. It has been held by members of the royal Tudor dynasty, Tudor and House of Stuart, Stuart families.
The current dukedom of Richmond was ...
and his heirs was granted in 1676 a duty of one shilling per ton of all coals exported from the
Tyne for consumption in England. This was redeemed in 1799 for an annuity of £19,000 (chargeable on the Consolidated Fund), which was afterwards redeemed for £633,333.
The
Duke of Hamilton
Duke of Hamilton is a title in the Peerage of Scotland, created in April 1643. It is the senior dukedom in that peerage (except for the Dukedom of Rothesay held by the Sovereign's eldest son), and as such its holder is the premier peer of Sco ...
, as
hereditary keeper of the palace of
Holyrood House
The Palace of Holyroodhouse ( or ), commonly referred to as Holyrood Palace or Holyroodhouse, is the official residence of the British monarch in Scotland. Located at the bottom of the Royal Mile in Edinburgh, at the opposite end to Edi ...
, received a perpetual pension of £45,105 and the descendants of the
heritable usher of Scotland drew a salary of £242 10s.
The conclusions of the committee were that pensions allowances and payments should not in future be granted in perpetuity, on the ground that such grants should be limited to the persons actually rendering the service, and that such reward should be defrayed by the generation benefited; that offices with salaries and without duties, or with merely nominal duties, ought to be abolished; that all existing perpetual pensions and payments and all hereditary offices should be abolished: that where no service or merely nominal service is rendered by the holder of an hereditary office or the original grantee of a pension, the pension or payment should in no case continue beyond the life of the present holder and that in all cases the method of commutation ought to ensure a real and substantial saving to the nation (the existing rate, about 27 years purchase, being considered by the committee to be too high). These recommendations of the committee were adopted by the government and outstanding hereditary pensions were gradually commuted, the only ones left outstanding being those to Lord Rodney (£2,000) and to Lord Nelson (£5,000), both chargeable on the Consolidated Fund. Neither of these pensions is currently active, the Rodney Pension was commuted in 1924 for a sum of £42,000, and the Nelson Pension was ended as a result of the Trafalgar Estate Act 1947. This Act allowed for the pension to continue to be paid to
the then-current recipient and
his heir, and provided for payments to cease on the death of the heir.
Political pensions
These are type ''
sui generis
''Sui generis'' ( , ) is a Latin phrase that means "of its/their own kind", "in a class by itself", therefore "unique".
A number of disciplines use the term to refer to unique entities. These include:
* Biology, for species that do not fit in ...
'' as they either reward a career in domestic politics or are awarded in the colonial context not on grounds of justice,
contract
A contract is a legally enforceable agreement between two or more parties that creates, defines, and governs mutual rights and obligations between them. A contract typically involves the transfer of goods, services, money, or a promise to tran ...
or socio-economic merits, but as a political decision, in order to take a politically significant person (often deemed a potential political danger) out of the picture by paying him or her off, regardless of seniority.
Civil List pensions
These are pensions granted by the sovereign from the
Civil List
A civil list is a list of individuals to whom money is paid by the government, typically for service to the state or as honorary pensions. It is a term especially associated with the United Kingdom and its former colonies of Canada, India, New Zeal ...
upon the recommendation of the
First Lord of the Treasury
The first lord of the Treasury is the head of the Lords Commissioners of the Treasury exercising the ancient office of Lord High Treasurer in the United Kingdom, and is by convention also the prime minister. This office is not equivalent to the ...
. They were to be "granted to such persons only as have just claims on the royal beneficence or who by their personal services to the Crown, or by the performance of duties to the public, or by their useful discoveries in science and attainments in literature and the arts, have merited the gracious consideration of their sovereign and the gratitude of their country." As of 1911, a sum of £1,200 was allotted each year from the Civil List, in addition to the pensions already in force. In 1908, the total of civil list pensions payable in that year amounted to £24,665. For 2012–13 the total annual cost of civil list pensions paid to 53 people was £126,293. The average pension was £2,383.
Judicial, municipal, etc. pensions
There are certain offices of the executive whose pensions are regulated by particular acts of Parliament. Judges of the
High Court, on completing fifteen years' services or becoming permanently incapacitated for duty, whatever their length of service, may be granted a pension equal to two-thirds of their salary (
Supreme Court of Judicature Act 1873
The Supreme Court of Judicature Act 1873 (sometimes known as the Judicature Act 1873) was an Act of the Parliament of the United Kingdom in 1873. It reorganised the English court system to establish the High Court and the Court of Appeal, and ...
). Historically the
Lord Chancellor
The lord chancellor, formally the lord high chancellor of Great Britain, is the highest-ranking traditional minister among the Great Officers of State in Scotland and England in the United Kingdom, nominally outranking the prime minister. The ...
of Great Britain, however short a time he may have held office, received a pension of half his salary. The Public Service Pensions Act 2013 abolished this arrangement, and subsequent Lord Chancellors have participated in the Ministerial Pension Scheme.
Local authorities contribute to pensions in the Local Government Pension Scheme using powers in the
Superannuation Act 1972
A pension (, from Latin ''pensiō'', "payment") is a fund into which a sum of money is added during an employee's employment years and from which payments are drawn to support the person's retirement from work in the form of periodic payments ...
.
Ecclesiastical pensions
Bishop
A bishop is an ordained clergy member who is entrusted with a position of authority and oversight in a religious institution.
In Christianity, bishops are normally responsible for the governance of dioceses. The role or office of bishop is ca ...
s, deans, canons or incumbent who are incapacitated by age or infirmity from the discharge of their ecclesiastical duties may receive pensions which are a charged upon the revenues of the see or cure vacated.
Royal Navy – historical
Navy pensions were first instituted by
William III of England
William III (William Henry; ; 4 November 16508 March 1702), also widely known as William of Orange, was the sovereign Prince of Orange from birth, Stadtholder of County of Holland, Holland, County of Zeeland, Zeeland, Lordship of Utrecht, Utrec ...
in 1693 and regularly established by an order in council of Queen Anne in 1700. Since then the rate of pensions has undergone various modification and alterations; the full regulations concerning pensions to all ranks will be found in the quarterly Navy List, published by authority of the Admiralty. In addition to the ordinary pension there are also good-service pensions, Greenwich Hospital pension and pensions for wounds.
An officer was entitled to a pension when he retired at the age of 45, or if he retired between the ages c 40 and 45 at his own request, otherwise he received only half pay. The amount of his pension depended upon his rank, length of service and age. As an example, in past, the maximum retired pay of an admiral was £850 per annum, for which 30 years' service or its equivalent in half-pay time was necessary; he may, in addition, have held a good service pension of £300 per annum. The maximum retired pay of a vice-admiral with 29 years' service was £725; of rear-admirals with 27 years' service, £600 per annum. Pensions of captains who retire at the age of 55, commanders, who retire at 50, and lieutenants who retire at 45, ranged from £200 per annum for 17 years' service to £525 for 24 years' service. The pensions of other officers were calculated in the same way, according to age and length of service.
The good-service pensions consisted of ten pensions of £300 per annum for flag-officers, two of which may be held by vice-admirals and two by rear-admirals; twelve of £150 for captains; two of £200 a year and two of £150 a year for engineer officers; three of £100 a year for medical officers of the navy; six of £200 a year for general officers of the Royal Marines and two of £150 a year for colonels and lieutenant-colonels of the same. Greenwich Hospital pensions range from £150 a year for flag officers to £25 a year for warrant officers. All seamen and marines who have completed twenty-two years' service were entitled to pensions ranging from 1d. a day to a maximum of 1s. 2d. a day, according to the number of good-conduct badges, together with the good-conduct medal, possessed. Petty officers, in addition to the rates of pension allowed them as seamen, were allowed for each year's service in the capacity of superior petty officer, 15s. 2d. a year, and in the capacity of inferior petty officer 7s. 7d. a year.
Men who were discharged from the service on account of injuries and wounds or disability attributable to the service were pensioned with sums varying from 6d. a day to 2s. a day. Pensions were also given to the widows of officers in certain circumstances and compassionate allowances made to the children of officers. In the Navy estimates for 1908–1909 the amount required for halfpay and retired-pay was £868,800, and for pensions, gratuities and compassionate allowances £1,334,600, a total of £2,203,400.
Navy pensions were updated in 1975 with the Armed Forces Pension Scheme 1975 Regulations.
Modern armed forces
Members of all three modern armed forces are members of the Armed Forces Pensions Scheme, which is a career average defined benefit pension scheme, and is described by the government as one of the most generous pensions available in the UK today. One key feature of the current scheme (dating from 2015) is that members pay no employee contribution, with the pension being entirely funded from the public purse. Each year a scheme member accumulates 1/47th of their salary, with a retirement age of 60. The annual pension payment increases each year in line with the Consumer Price Index.
Pension provision by age group
The family resources survey
Family Resources Survey 2005–06
from the UK Department for Work and Pensions
, type = Department
, seal =
, logo = Department for Work and Pensions logo.svg
, logo_width = 166px
, formed =
, preceding1 =
, jurisdiction = Government of the United Kingdom
, headquarters = Caxton House7th Floor6–12 Tothill Stree ...
, details levels of income, saving and pension provision for a representative selection of UK households and is the source for the table below for UK employees (Table 7.12):
Most employees over the state pension age of 65 would not have pension provision as part of their salary and benefits—they may well, however, be receiving income from a pension from previous employment.
See also
*Association of Pension Lawyers
The Association of Pension Lawyers (APL) is a group of more than 1,100 lawyers who practise pension law in the UK. It is a non-profit making organisation and has no connection with the Law Society. Founded in 1984, it represents a forum by which ...
*Gender pension gap The gender pension gap (also known as the sex pension gap) is the percentage difference in pension income between women and men. It is often calculated as the difference between the average man's pension and the average woman's pension, expressed as ...
*Pensions in Germany
Pensions in Germany are based on a “three pillar system”.
* First pillar: mandatory state pension insurance (''gesetzliche Rentenversicherung''). This part of the basic social security system. All employees and employers pay a percentage of sa ...
*Pensions in the United States
Pension, Pensions in the United States consist of the Social Security (United States), Social Security system, Public employee pension plans in the United States, public employees retirement systems, as well as various private pension plans offered ...
*Ageing of Europe
The ageing of Europe, also known as the greying of Europe, is a demographic phenomenon in Europe characterised by a decrease in fertility, a decrease in mortality rate, and a higher life expectancy among European populations. Low birth rates an ...
*Pension tax simplification
Pension tax simplification, often simply referred to as "pension simplification" and taking effect from A-day on 6 April 2006 was a policy announced in 2004 by the Labour government to rationalise the British tax system as applied to pension schem ...
*Minimum funding requirement The Minimum Funding Requirement (MFR) was a part of United Kingdom legislation in the Pensions Act 1995, and was introduced on 6 April 1997. The Pensions Act 2004 abolishes the MFR replaces it with new "statutory funding objective"; this came int ...
* Frozen pension
*Superannuation in Australia
In Australia, superannuation, or just super, is the term for retirement pension benefit funds. Employers make compulsory contributions into these funds on behalf of their employees.
Superannuation is compulsory for all employed people workin ...
*Pensions in Canada Pensions in Canada can be public, private, and collective, or come from individual savings.
The Canada Pension Plan (CPP) forms the basic state pension system. All those employed aged 18 or older must contribute a portion of their income to a pensi ...
*Personal pension scheme
A personal pension scheme (PPS), sometimes called a personal pension plan (PPP), is a UK tax-privileged individual investment vehicle, with the primary purpose of building a capital sum to provide retirement benefits, although it will usually also ...
State pensions acts
* Widows, Orphans and Old Age Contributory Pensions Act 1925
* National Insurance Act 1946
The National Insurance Act 1946 (c 67) was a British Act of Parliament passed during the Attlee ministry which established a comprehensive system of social security throughout the United Kingdom.
The act meant that all who were of working age we ...
* National Insurance Act 1965
* Social Security Contributions and Benefits Act 1992
Social organisms, including human(s), live collectively in interacting populations. This interaction is considered social whether they are aware of it or not, and whether the exchange is voluntary or not.
Etymology
The word "social" derives from ...
Private pensions acts
* Superannuation and other Funds (Validation) Act 1992
* Pension Schemes Act 1993
The Pension Schemes Act 1993c 48 is a United Kingdom Act of Parliament that concerns the administration of occupational pensions.
Background
The Pension Schemes Act 1993 was the first statute to result from the comprehensive inquiry led by Roy ...
* Pensions Act 1995
The Pensions Act 1995c 26 is a piece of United Kingdom legislation to improve the running of pension schemes.
Background
Following the death of Robert Maxwell, it became clear that he had embezzled a large amount of money from the pension fund ...
* Pensions Act 2004
The Pensions Act 2004 (c 35) is an Act of the Parliament of the United Kingdom to improve the running of pension schemes.
Background
In the years following the introduction of the Pensions Act 1995, it was widely perceived that it was failing ...
* Pensions Act 2007
* Pensions Act 2008
Auto-enrolment solutions
* Smart Pension
*National Employment Savings Trust
The National Employment Savings Trust (Nest) is a defined contribution workplace pension scheme in the United Kingdom. It was set up to facilitate automatic enrolment as part of the government's workplace pension reforms under the Pensions Act 2 ...
*The People's Pension The People's Pension is a United Kingdom trust based defined contribution workplace pension scheme for non-associated employers, commonly referred to as a Master Trust, 'master trust'.
History
The UK Pensions Act 2008 established new duties which r ...
Notes
References
;Books
*Matthew Rhodes, 'The Story of UK Pensions' (2021),
*L Hannah, ''Inventing Retirement'' (1986) HD7165 H24
;Articles
*T Schuller and J Hyman, 'Pensions: The Voluntary Growth of Participation' (1983) 14(1) Industrial Relations Journal 70
;Reports
*White Paper, ''Occupation Pension Schemes: The Role of Members in the Running of Schemes'' (1976) Cmnd 6514
*Wilson Report (June 1980) Cmnd 7937
*R Goode
Sir Royston Miles "Roy" Goode (born 6 April 1933) is an academic commercial lawyer in the United Kingdom. He founded the Centre for Commercial Law Studies at Queen Mary, University of London. He was awarded the Order of the British Empire, OBE ...
, ''Pension Law Reform {{Short description, Government issued inquiry
''Pension Law Reform'' (1993) Cm 2342, also known as the Goode Report after its leading author, Roy Goode, was a UK government commissioned inquiry into the state of pensions in the United Kingdom, whic ...
'' (1993) Cm 2342
External links
Pension Wise
– A free and impartial government service about your defined contribution pension options.
Association of Member-Directed Pension Schemes (AMPS)
– The principal body for discussing changes involved in the area of pension planning.
*
Money Alive
Chartercross Capital Management
– Simple Impartial Advice.
{{Economy of the United Kingdom