Committee on Economic Security (CES)

Volume II. Old Age Security

Other Staff Reports
Foreign Systems

BRITISH OLD AGE PENSIONS AND OLD AGE INSURANCE

by
Olga S. Halsey

To: Mr. Witte

From: Olga S. Halsey

Subject: BRITISH OLD AGE PENSIONS AND OLD AGE INSURANCE

In 1932 Great Britain and Northern Ireland were providing old age pensions to a total of 2,231,016 persons aged 65 and over under the combined Old Age Pensions Acts, 1908-1924, and under the Widows', Orphans' and Old Age Contributory Pensions Act, 1925-1932. Of the total old age pensions, 699,853 were granted to men and women between 65 and 70 under the "contributory pensions" scheme; and 1,531,163 to persons over 70 under the non-contributory Old Age Pensions Acts, 1908-1924. Of those over 70 receiving non-contributory pensions, 662,638 were receiving their pensions by virtue of the special relaxations in qualifications for non-contributory pensions extended to those who had been in receipt of a contributory pension between the ages of 65 and 70.¹

Under the existing provisions of the non-contributory Old Age Pensions Acts, 1908-1924, Great Britain grants & non-contributory old age pension of 10s. a week at age 70 to those with an annual income of less than 49 17s. 6d., exclusive of sick benefit for not more than three months and exclusive of unearned annual income up to 39. The rate of the pension is graded with the rate of income: the full rate of pension of 10s. a week is granted to those with an annual income of less than 26 5s., and the and the pension diminishes to a minimum of 1s. a week as annual income increases to a maximum of 47 5s. but less than 49 17s. 6d.²

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¹ Compiled from: Great Britain, Ministry of Labour, Twenty-first Abstract of Labour Statistics of the United Kingdom (1919-1933). London, H.M. stationery off., 1934, Cmd. 4625, pp. 170-173.)

² Hohman, Helen. The Development of Social Insurance and Minimum Wage Legislation in Great Britain. Boston, Houghton Mifflin, 1933. p. 44.

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In practice, practically all the pensions are paid at the maximum rate: i.e., in Great Britain and Northern Ireland in 1932, but 26,288 pensions out of the total of 1,531,163 non-contributory pensions paid in that year were at the reduced rate.³ To be eligible for a pension, the applicant must have been a British citizen for at least the last ten years and must have resided in the United Kingdom a minimum period--if a natural born citizen, not less than 12 years since attaining age 50 and if a naturalized citizen, not less twenty years.⁴ In addition, the applicant is disqualified from a pension under the following conditions: when detained in an insane asylum; imprisoned without option of fine; while maintained in a poor law institution for other than medical aid and upon conviction for intoxication, under special circumstances.⁵ The minister of Health is the appeal authority; through the Ministry, the act is actually administered by pension officers of the Board of Customs and Excise (under the Treasury) who act as pension officers for representative local pension committees, appointed by the local county and borough councils. The pension officers conduct the necessary investigations while decisions as to whether statuary

conditions are fulfilled rest with the pension committees.⁶ The pensions are paid through the local post-office--the pensioner is furnished with a book of pension orders which are cashed at the post-office as they become due.⁷

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³ Great Britain, Ministry of Labour, Twenty-first Abstract of Labour Statistics of the United Kingdom (1919-1933), p. 173.

⁴ Cohen, Percy. The British System of Social Insurance. London, Phillip Allan, 1932, pp. 108, 110.

⁵ Great Britain, Old Age Pensions Act, 1908 (7 Edw. 7c.40), as amended, sec. 2.

⁶ Great Britain, Old Age Pension Act, 1908, sec. 7.

⁷ Cohen, Percy, loc. cit., p. 108.

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During twenty-five years' administration, the number of pensioners and the annual expenditure have both increased. The number of pensioners has increased in the United Kingdom from 647,494 in 1909 to 1,579,938 in 1923 for Great Britain and Northern Ireland (i.e., the same area, minus the Irish Free State.)⁹ During the same years, the expenditure for the same geographical units has increased from 2,026,000 to 41,047,O30.¹⁰

The existing provision is the result of a number of amending acts which have substantially liberalized the original act of 1908. The rate of pension has been raised from the original maximum of 5s. a week to its present maximum of l0s. a week: the maximum income which a person my have and qualify for a pension under the non-contributor) act has been increased from 31 10s. to a maximum of 49 17s. 6d.; the method of computing income has been liberalized; the qualifications regarding British citizenship and length of residence in Great Britain have been made less stringent while the original character qualifications have been made much less severe.¹¹ In addition, the means test qualifications as to citizenship and residence have been abolished entirely for those in receipt of an old age pension under the Contributory Pensions Acts 1925-1932 who pass on to a contributory pension at age 70.¹²

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8. Great Britain, Ministry of Labour, Eighteenth Abstract of Labour Statistics of the United Kingdom, London, H.M. stationery off., 1926, 2740, p. 212.

9. Great Britain, Ministry of Labour, Twenty-first Abstract of Labour Statistics of the United Kingdom (1919-1933), p. 173.

10. Ibid.

11. Hohman, Helen, op. cit., pp. 36-44.

12. Great Britain, Seventh Annual Report of the Ministry of Health, 1925-London, H.M. Stationery off., 1926, Cmd. 2724, p. 125.

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The removal of these conditions applies to more than forty per cent of the total pensions granted in 1932 in Great Britain and Northern Ireland under the Old Age Pensions Acts, 1908-1924, i.e., to 662,638 out of a total of 1,531,161 pensions.¹³

The agitation to lower the pensionable age to 65 and to provide a universal pension had its fruition in the old age pension granted to those between 65 and 70 under the provisions of the Widows', Orphans', and Old Age Contributory Pensions Act of 1925 and in the abolition of the means test, and requirement of nationality and residence for those receiving a non-contributory pension at age 70 after having been in receipt of a contributory pension between ages 65 and 70.

The Widows', Orphans', and Old Age Contributory Pensions Act of 1925, came into operation in 1926, with contributory old age pensions payable January, 1928.¹⁴ This act combines pensions to widows and to orphans with an old age pension for those between 65 and 70. It utilizes the contributory principle, previously adopted for health and unemployment insurance, and continues to distribute the cost between workers, employers and the national treasury.

The contributory pension act "interlocks" with health insurance--that is, the scope of the two acts is almost the same and the contribution for the two forms of insurance are combined in a single stamp. Thus the total number of persons insured in 1933 in England under the contributory pensions acts or for whom contributions were available totaled 15,876,000 as compared with 15,598,000 insured under health insurance.¹⁵ The funds for pensions and for health insurance are entirely separate, although the administration is unified. ¹⁶

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¹³ Great Britain, Ministry of Labour, Twenty-first Abstract of Labour Statistics of the United Kingdom (1919-1933), Cmd. 4625, p. 173.

^l4 Great Britain, Seventh Annual Report of the Ministry of Health,1925-l926, Cmd. 2724, pp. 123, 127; Cohen, Percy, op. cit., p. 71.

¹⁵ Great Britain, Fifteenth Annual Report of the Ministry of Health, 1933-34. London, H.W. stationery off., 1934 Cmd. 4664, pp. 358, 363.

¹⁶ Cohen, Percy, loc. cit. p. 91.

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A flat rate contribution for the combined widows', orphans' and old age insurance, uniform for all wage and age groups was provided; in the case of men, the employer pays 4½d. weekly while the worker also pays 4½d., or a total of 9d; for women employees, the employer pays 2½d. and the worker herself, 2d., or a total of 4d. The combined weekly contribution of men for both health insurance and pension plan is 1s. 6d. and for women ls. 1d.¹⁷ Upon the introduction of the pension plan, contributions under both health and unemployment insurance were lowered, the net increase in contributions for those coming under all three schemes was 4d. for men and 2d. for women, divided equally between the employer and the worker.¹⁸

The national Exchequer assumed the financial responsibility of pensions at 70 for those qualifying under the relaxed provisions of the contributory pensions act and in addition for the first ten years, it makes an annual contribution of 10,000,000 to contributory pensions.¹⁹ Thereafter, Parliamentary contributions are to be for such amounts as Parliament sees fit²⁰, and contributions of workers and employers are to be increased. During the second ten years of the plan, men's contributions are to be increased by 2d. and women's by 1d., divided equally between employer and worker, with corresponding additional increases during the succeeding ten year periods beginning January, 1940 and January, 1956. ²¹

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¹⁷ Cohen, Percy, loc. cit. p. 60

¹⁸ Great Britain, Seventh Annual Report of the Ministry of Health, 1925-1926, Cmd. 724, p. 124.

¹⁹ Cohen, Percy, loc. cit. p. 93.

²⁰ Great Britain, Widows', Orphans' and Old Age Contributory Pensions Act, 1925 (15 and 16 Geo. 5, c. 70, Sec. 11)

²¹ Cohen, percy, op. Cit., p. 93

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The act provides a contributory pension of 10s. a week to insured men and women between the ages of 65 and 70 and to wives between 65 and 70 when their husbands are entitled to a contributory pension. Or, if a wife or widow is over 70 when her husband is entitled to a contributory pension, she becomes eligible for a non-contributory pension, without the application of the tests regarding means, nationality or residence. The right to sickness and disablement benefit under the health insurance act and to unemployment benefit cease at age 65; under these acts, workers' contributions terminate at age 65. Upon reaching 70, all persons in receipt of a contributory pension become eligible for a non-contributory pension, without the application of the means test nor that of nationality or of residence.²² To be eligible for a pension at 65, the insured must have had a certain minimum amount of insurance to his credit: First, five years' continuous insurance prior to reaching age 65: secondly, 104 contributions must have been paid since his last reentry into insurance, and finally, an average of 39 contributions in each of three years, prior to the sixty-fifth birthday. Under amending acts, this last condition is waived in the case of those who have had a record of ten years' continuous insurance prior to attaining age 58 1/4. In effect, persons with ten years' continuous insurance before 58 1/4 are continued in insurance, even though they may be continuously unemployed until reaching age 65.²³

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²² Great Britain, Seventh Annual Report of the Ministry of Health, 1925-1926, Cmd. 2742, p. 125: Cohen, Percy, op. Cit., p. 75.

²³ Great Britain, Widows', Orphans' and Old Age Contributory Pensions Act, 1925, sec 8; Eleventh Annual Report of the Ministry of health, 1929-1930, Cmd. 3667, p. 188; Fourteenth Annual Report of the Ministry of Health, 1932-33, Cmd. 4372, p. 208; Cohen, Percy, loc. cit., pp. 72, 75.

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The insurance is administered through a central administration of the Ministry of Health, with some assistance from the local authorities, while pensions are paid through the local post-office. All claims for pensions are made in the first instance to the Ministry of Health.²⁴

The amending act of 1929 further liberalized the provisions: wives between 65 and 70 whose husbands had passed 70 when pensions were first payable under the act became entitled to a pension between 65 and 70; residence qualifications were repealed and pensions were made payable in any part of the British empire and workers might retain their insurance in any part of the empire.²⁵

Steps have been taken to keep in insurance or to facilitate the return to insurance of unemployed workers.²⁶

During the few years' operation, the number of pensioners have increased: pensioners in Great Britain and Northern Ireland between 65 and 70 have increased from 544,242 in 1928 to 699,853 in 1932; those in receipt of a pension at 70, free from all restrictions as to means, nationality, etc., have increased from 298,161 in 1928 to 662,638 in 1932 end to 765,246 in 1933.²⁷

This increase in persons over 70 receiving pensions under the special provisions of the Widows', Orphans' and Old Age Pensions Contributory Pensions Act has been accompanied by a slight decrease in the numbers receiving a pension under the normal provisions of the non-contributory Old Age Pensions Act, i.e., a decline from 1,112,869 in 1926, 868,525 in 1932 and to 814,692 in 1933. The net effect, however, has been to increase by approximately 40 per cent those receiving non-contributory pensions--i.e., an increase from 1,112,869 in 1926 to 1,531,163 in 1932 and to 1,579,938 in 1933.²⁸ Expenditures for pensions of those between 65 and 70 have increased in England from 2,703,000 in 1928 to 15,547,000 in 1932 and to 16,381,000 in l934.²⁹

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²⁴ Great Britain, Seventh Annual Report of the Ministry of Health, 1925-1926, Cmd. 274, p. 127.

²⁵ Great Britain, Eleventh Annual Report of the Ministry of Health, 1929-1930, London, H.M. stationery off., 1930, Cmd. 3667, pp. 187, 188; Cohen, Percy, loc. cit., p. 1929.

²⁶ Great Britain, Fourteenth Annual Report of the Ministry of Health, 1932-1933. London, H. M. stationery off., 1933, Cmd. 4372, pp. 208, 217.

²⁷ Great Britain, Ministry of Labour, Twenty-first Abstract of Labour Statistics of the United Kingdom (1919-1933), Cmd. 4625, pp. 171, 173.

²⁸ Ibid., p. 173.

²⁹ Great Britain, Fifteenth Annual Report of the Ministry of Health, 1933-34, London, H.M. stationery off., 1934, Cmd. 4664, p. 353.

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This summary has been confined to a statement of bare facts; from these facts the following generalizations and conclusions may be drawn: First, that the benefit provisions tend to become more liberal and qualifying conditions less exacting, and secondly, that the British have achieved some degree of integration among the various forms of contributory insurance, particularly in the 'interlocking" of health insurance and contributory old age pensions. In view of this policy, it is significant that the British adopted national administration of contributory pensions through the Ministry of Health instead of through the cumbersome machinery of approved societies adopted for health insurance. The substantial increase in the numbers during non-contributory pensions since the operation of contributory pension indicates a third conclusion,-- that in Great Britain, at least, there were a large number of persons over 70 who were not benefitted by the non-contributory pensions, who were excluded, possibly by qualifications regarding means, nationality and residence, but who qualify under the revised conditions of the contributory pension act.

Periods of severe and prolonged unemployment present to contributory insurance, the problem of maintaining contributions over a period of years, so that the insured will be eligible for a pension--the difficulty in doing this during the depression has led to modifications in the British act which must affect its underlying finances.

BIBLIOGRAPHY

I. PRIMARY SOURCES

Great Britain. Old Age Pensions Acts, 1908-1924. (7 Ed. 7, c. 40;1 and 2 Geo. 5, c. 16; 9 and 10 Geo. 5, c. 102); as reprinted in: International Labour Office, Legislative Series, 1924, Great Britain, 7.

Widows', Orphans' and Old Age Contributory Pensions Act, 1925 (15 and 16 Geo. 5, c. 70); as reprinted in: International Labour Office, Legislative Series, 1925, Great Britain, 7.

Ministry of Health. Seventh Annual Report of the, 1925-1926.London, H. M. stationery off., 1926. Cmd. 2724. 204 p). (R. A241 B 122, Library of Congress)

Eleventh Annual Report of the, 1929- 1930.London, H. M. stationery off., 1933. Cmd. 3667.277 ph. (RA 241 B 122 Library of Congress).

Fourteenth Annual Report of the, 1932-1933.London, H. M. stationery off. 1933. Cmd. 4372. 329 pp. (RA241 B 122 Library of Congress.

Fifteenth Annual Report of the, 1933- 1934.London, H. M. stationery off., 1934. Cmd. 4664. 388 p,. (RA 485 A55 1933/34, Department of Labor Library).

Ministry of Labour. Eighteenth Abstract of Labour Statistics of the United Kingdom. London, H. IA. stationery Off., 1926. Cmd. 2740. 22922. (H. F. 838l A 2, Department of Labor Library).

Twenty-first Abstract of Labour Statistics of the United Kingdom (1919-1933). London, H.M. stationery off., 1934. Cmd. 4625. 211 pp. (HD 8381 A2 1919/33 Department of Labor Library).

II. SECONDARY SOURCES

Cohen, Percy, The British System of Social Insurance. London, Phillip Allan, 1932.

Contains summaries of Old Age Pensions Act, 1908-1924 and Widows', Orphans' and Old Age Contributory Pensions Act, 1925-1932.

Hoare, H. J. Old Age Pensions. London, P. 5. King, 1915, -pp.

Study of operation of old age pension act, 1908.

Hohman, Helen Fisher. Development of Social Insurance and Minimum Wage Legislation in Great Britain; a study of social legislation in relation to a minimum standard of living. Boston, Houghton Mifflin, 1933. 441 pp.

Chapter on non-contributory and contributory old age pensions, sometimes inaccurate.

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