1 August 08 - A state pension built to last for the next 100 years - Purnell welcomes centenary of the state pension

1 August 08 - A state pension built to last for the next 100 years - Purnell welcomes centenary of the state pension

James Purnell today paid tribute to those who campaigned for the first state pension a century ago - and looked forward to the next 100 years of the state pension as a result of vital reform to the system.

Mr Purnell, Secretary of State for Work and Pensions, said changes making the state pension system simpler, fairer for women and carers and more generous by re-linking the Basic State Pension to average earnings, provided a settlement built to last for generations to come.

The reforms come as new DWP research revealed only half of people surveyed thought the state pension would be around when they retire, with 44 per cent sure it won't be¹.

James Purnell said: 

"We owe a debt of gratitude to those who fought for the first state pension. Today the challenges are very different from 1908 when just one in four survived to collect the first state pension.  In contrast, one in four babies born today will go on to live to 100.

"The impact of this is stark. Current trends suggest the UK will have its first 120 year old in the early 2060s, if not before. That means she is already drawing her state pension and will do so for half her lifetime.

"We have a responsibility to look after today's pensioners whilst also being custodians of the state pension for future generations - and that means putting in place a system that can cope with a rapidly ageing population and high expectations for retirement, whilst remaining affordable. I believe we have struck that balance.

"The state pension is now in good shape for the generations to come and people can be reassured it will continue to form the bedrock of pension provision for another 100 years."

Mr Purnell said that the Government's commitment to restore the earnings link to the Basic State Pension meant that by 2050 it will be worth about double what it is today (in 2008-09 prices). But this also needed to be paid for. Because the proportion of people of working age to pensioners was shrinking, the state pension age would be gradually increased to 68 by 2046 so that future generations were not left to foot the bill for longer life expectancy.

Mr Purnell said increasing food and fuel prices were putting pressure on many of today's pensioners. He emphasised tackling poverty amongst today's pensioners continued to be a top priority for the Government. 

He said: "Pensioners especially are feeling the affect of price rises in their heating bills and at the supermarket.  We're interested in innovative ways to tackle fuel poverty and to make it easier for older people to claim the benefits they're entitled to and will continue to talk to older people's groups about what more we can do.

"For example, from October, we will be making it simpler and more automatic to claim Pension Credit, Housing Benefit and Council Tax Benefit in one call. Older people will be able to claim the three benefits together, entirely over the phone without having to sign or return any claim forms, which I know they find frustrating.

"We have amended the current Pensions Bill to allow secure data-sharing with energy suppliers to help reduce the bills of older people receiving Pension Credit.  And in winter 2008-09 there will be an extra £50 on top of the Winter Fuel Payment for households with someone over 60, and an extra £100 for over-80s households."

Notes for Editors

1. The centenary of Royal Assent of the Old Age Pensions Act 1908 is Friday, August 1.
2. For photos, archive material, and facts and figures on the state pension centenary go to www.dwp.gov.uk/mediacentre/pensioncentenary/
3. The Old Age Pensions Act 1908 created a means-tested state pension of up to five shillings per week for some of the poorest pensioners aged 70 and above. To receive it people had to pass a 'character test'. People were ruled out of a pension if they had refused work when able, made themselves poor in order to qualify, had been imprisoned or were habitually inebriated.
4. The full pension was 5 shillings (25p) for single man or woman, 7s and 6d (38p) for a married man. In today's money that's £19.30 and £29. By the end of 1909, there were around 500,000 pensions in payment in Great Britain.
5. Only 24 per cent of people survived to 70 in 1908. Those who did lived for just nine more years, on average.
6. Today, 84 per cent of us make it to collect our state pension (at 60 for women and 65 for men) and live, on average, for a further 24 years - that's a third of our lives in retirement. There are around 11 million pensioners in Great Britain.
7. Around one in four babies born today are expected to live to 100. Of those born in 1908, about one in two hundred will reach 100.
8. The number of people aged 100 or over is projected to grow from 11,000 today to 250,000 in 2050 - 23 times as many in just 50 years.
9. During the last 100 years the proportion of people of working age to pensioners has shrunk considerably. One reason for reforming the system is to prevent the cost of an ageing population being passed on to future generations of working age people. At the beginning of the last century there were 10 workers for every pensioner. Today, the ratio is about four to one, and by 2050 it will be about two workers to each pensioner.
10. For more information on pension reform go to http://www.dwp.gov.uk/pensionsreform/
11. For information on the state pension and other benefits go to http://www.pensionservice.gov.uk/