233. The problem of the nature and extent of the provision to be made for old age is the most important, and in some ways the most difficult, of all the problems of social security. It is so for two main reasons.
234.First, age, as a cause of inability to earn after childhood is past, exceeds in importance all the other causes of such inability together. Just before the present war there were at any moment about twice as many people in Britain of pensionable age, that is to say, 65 and upwards for men and 60 and upwards for women, as there were men and women of working age dependent on their earnings who could not earn through unemployment or disability of all kinds. The cost of pensions relatively to the rest of social security will increase inevitably through increase in the proportion of people of pensionable age in the population. This is shown by Table XI based on the White Paper as to Current Trends of Population in Great Britain prepared by the Registrar General and on further information supplied by him. The persons of pensionable age (65 for men and 60 for women) at the beginning of the century were about 2 ¼ millions or 1 in 17 of the whole population; in 1931 they were about 4 ¼ millions or 1 in 10 of the population; in 1961, less than twenty years from now, they will be more than 8 millions or 1 in 6 of the population, and they will continue to increase proportionately to the rest. On the other side, the Table shows the continuous decline of the child population which, if not arrested, will after 1971 bring about a rapid diminution of the whole population. In 1901 there were more than five children under 15 for every person of pensionable age. In 1961, less than twenty years from now, there will be one child under 15 for every person of pensionable age, and in 1971 the children will be outnumbered by the possible pensioners. These figures depend upon the assumptions made as to the future of birthrates and death-rates, and the results will be different if these assumptions are not realised. In particular a large increase in the birth-rate would increase the number of children relatively to others.
TABLE XI
Estimated Population Of Great Britain By Age groups 1901 to 1971
| Total |
Per |
Men 15-64 |
Per |
Men 65 |
Per |
||
| Year | Population | Under |
cent. |
Women |
cent. |
and over |
cent. |
| 15 | of |
15-59 (both |
of |
Women 60 | of | ||
|
Total |
inclusive) |
Total |
and over | Total | |||
| 1901 | 36,999,946 |
12,040,841 |
32-5 |
22,674,624 |
61-3 |
2,284,481 |
6-2 |
| 1911 | 40,831,396 |
12,587,504 |
30-8 |
25,495,097 |
62-4 |
2,748,416 |
6-7 |
| 1921 | 42,769,196 |
11,940,167 |
27-9 |
27,479,043 |
64-2 |
3,349,222 |
7-8 |
| 1931 | 44,795,357 |
10,825,072 |
24-2 |
29,674,695 |
66-2 |
4,295,430 |
9-6 |
| 1941* | 46,565,000 |
9,573,000 |
20-6 |
31,421,000 |
67-5 |
5,571,000 |
12-0 |
| 1951* | 47,501,000 |
9,054,000 |
19-1 |
31,548,000 |
66-4 |
6,899,000 |
14-5 |
| 1961* | 47,192,000 |
8,433,000 |
17-9 |
30,710,000 |
65-1 |
8,049,000 |
17-1 |
| 1971* | 45,980,000 |
7,600,000 |
16-5 |
28,804,000 |
62-6 |
9,576,000 |
20-8 |
* These estimates are based on the assumptions as to fertility and mortality given in the White Paper on “Current Trend of Population in Great Britain” and depend upon the validity of those assumptions.
• These figures include a few persons not classified by age and therefore not included in any of the three age groups.
235. Second, the economic and social consequences of old age in the individual case are not uniform. Old age may cause acute poverty and it may cause no poverty at all. Mr. Rowntree in 1936 found that in York the poverty due to old age was more acute than that due to any other single cause. That was before the institution of supplementary pensions in 1940. But even then a great many of the aged were not in want at all. Of all the old age pensioners in York in 1936, only one-third were living below Mr. Rowntree’s standard of human needs. For the rest, their pension of 10/- a week, with other resources, of their own or of their families, was enough to keep them above that standard. This conclusion of Mr. Rowntree’s accords well with the fact that at the end of 1941 only 37 per cent., just over one-third;-of all persons having contributory or non-contributory pensions had claimed and qualified for supplementary pensions ; the rest, nearly two-thirds, had either felt able to manage without applying for supplementation or had been disqualified under the means test. Besides these pensioners on 10/-a week who either did not claim or did not qualify for supplement, there are many old people who have no pension at all, yet are not in such need as leads them to apply for public assistance. Of all persons over 65 in Britain just before the war, nearly a third, and of those over 70 about one-fifth, were not in receipt either of State pensions or of public assistance in any form. Of course, this meant in some cases that they were in want, but would not apply for assistance. It meant in the majority of cases that they were maintained by relations, by their work or savings, by pensions provided otherwise than through the general State scheme, or by a combination of these methods. The first two of these methods are clearly the most important. Superannuation provision is made now for persons in particular occupations by the State, by local authorities and by many private employers, and it is made by some Trade Unions and Friendly Societies for their members, but it is doubtful if all these forms of superannuation provision, taken together, cover as much as one-tenth of the whole field.
236. The first of the features noted above, namely the scale of the problem of old age, has two implications. On the one hand, the provision made for age must be satisfactory; otherwise great numbers may suffer. On the other hand, every shilling added to pension rates is extremely costly in total; when the number of persons of pensionable age reaches 8 millions, as it will in less than twenty years, every weekly shilling on the pension will mean £20,000,000 a year on the cost of pensions for all; 5/- will mean £1000,000,000 a year. It is dangerous to be in any way lavish to old age, until adequate provision has been assured for all other vital needs, such as the prevention of disease and the adequate nutrition of the young.
237. Age at present is dealt with, so far as the State is concerned, by a threefold system of pensions; (a) contributory pensions of 10/- a week given to men at 65 or women at 60 without means test and irrespective of whether they are working or not, limited practically to persons who have been in employment; (b) non-contributory pensions of 10/- or less at the age of 70 subject to a means test ; (c) supplementary pensions confined to persons in receipt of one or other of the two classes of pensions named above, designed to meet needs adequately, subject to a means test different from that applied for non-contributory pensions. These arrangements, in addition to division of authority and unjustifiable differences of means test policy, have two principal defects. First, pensions, both contributory and supplementary, before the age of 70 are limited practically to persons in Class I. They are not generally available to persons who have worked on their own account or the wives or widows of such persons, or to persons or the wives of persons who have not been gainfully occupied. Since 1937 such persons, with others, have been able to enter a special scheme of voluntary insurance for pension, but apart from this no public provision is made for them in old age, except public assistance; recourse to public assistance means recourse to an independent authority applying its own test of means. Second, the contributory pensions given as of right are manifestly inadequate, if there are no other resources; at the same time they are often superfluous, since they may be drawn by people still able to earn a full living.
238. The problem for the future is how persons who are past work can be given a guarantee against want, in a form which gives the maximum of encouragement to voluntary saving for maintenance of standards above the subsistence minimum, and at the same time avoids spending money which is urgently needed elsewhere or money on a scale throwing an intolerable financial burden on the community.
239. Any Plan of Social Security worthy of its name must ensure that every citizen, fulfilling during his working life the obligation of service according to his powers, can claim as of right when he is past work an income adequate to maintain him. This means providing, as an essential part of the plan, a pension on retirement from work which is enough for subsistence, even though the pensioner has no other resources whatever; some pensioners will have no other resources. It means also providing a pension which is not reduced if the pensioner has resources. On the contrary, direct encouragement of voluntary insurance or saving to meet abnormal needs or to maintain standards of comfort above subsistence level, is an essential part of the Plan for Social Security proposed in this Report. It follows that the plan must include provision of pensions up to subsistence level, given as of right to people who are past work, regardless of the other resources that they then possess, but in respect of service and contribution during working life.
240. This does not mean that, as from the beginning of the Plan for Social Security, pensions up to subsistence level must be paid to all citizens who are past work, without regard to their other resources. On the contrary, for several reasons, it is important that the coming into operation of a scheme of adequate pensions given as of right should be gradual. One of the characteristics of old age as a problem in social security is that the coming of old age is inevitable and can be and is to a large extent foreseen. Provision for old age, whether by contributions to a compulsory scheme or otherwise^: must be made over a long period before old age is reached; provision independent of the State is made in fact, to a greater or less extent, through occupational superannuation schemes, voluntary insurance, or personal saving, by a number of people, substantial in itself though small in proportion to the total number of persons of pensionable age. The existence of this independent provision is not a reason which should lead the State to avoid making comprehensive adequate provision of its own for everybody in old age. But it does affect the steps by which that comprehensive provision should be introduced. A substantial proportion of the persons of pensionable age in Britain, though without pensions, have other resources; they will not be in need of income for subsistence at the outset of the Plan for Social Security. At the outset none of them will have made any contributions for adequate pensions from the State. Some will have paid contributions as for the present inadequate pensions for a substantial period. Others will have paid such contributions for a few years only; the present arrangements give an incentive to persons outside the contributory classes, on approaching the pensionable age, to get within those classes by employment which is sometimes specifically created for that purpose. Others outside the contributory classes will have paid no contributions at all. In view of the vital need of conserving resources, in the immediate aftermath of war, it is impossible to justify giving, as from the first day of the Plan for Social Security, full subsistence pensions to people who have neither contributed for such pensions nor are in need of them, who may in fact have full pension provision made for them in other ways in virtue of their occupation. The Plan for Social Security is based on the contributory principle; that principle, which is good in itself and in accord with popular sentiment in regard to provision against other forms of insecurity through unemployment, sickness, and the like, has special advantages in relation to the problem of pensions. It both justifies and requires postponement of payment of full subsistence pensions as of right and thus gives time—
(a) for the national income of the community to be built up again after the disturbance of the war ;
(b) for the great variety of superannuation schemes now in existence to be adjusted, if necessary, to the establishment of universal subsistence pensions for all citizens;
(c) for solution of the difficulty of determining the proper rate of subsistence benefits and pensions which is presented by variation of rents.
Transition Period Of Rising Pension Rates
241. These considerations point to the need for a transition period, during which passage from the present combination of inadequate contributory pensions and means pensions to adequate contributory pensions for all can be accomplished. They suggest introduction of contributory pensions not at full subsistence level from the outset, but rising gradually to that level over a period of years, with assistance pensions granted meanwhile, after examination of individual needs and means, to ensure that no old person is in want. In the scheme of social security recently established in New Zealand there is for pensions a transition period of 28 years; i.e., pensions without means test for all citizens over 65 beginning in 1940 at £10 a year rise to £78 a year in 1968; meanwhile an age benefit of 30/- a week subject to reduction for means is available forthwith. For Britain the transition period suggested is one of 20 years from 1945 taken as the first year of the new Plan for Social Security to 1965 as the first year in which contributory pensions will become payable as of right irrespective of means at the full provisional rate of 40/- joint for man and wife or 24/- single. The treatment in the transition period of persons standing in different relations to the present insurance schemes raises difficult questions of both equity and administration. The persons to be considered fall into three main groups: those who at the launching of the new scheme will have complete qualification for contributory pensions under the old scheme hi the sense that if they were then of pensionable age they would receive pensions; those who will have no contribution qualification at all for pensions under the old scheme; and those who will have made some contributions for such pensions but not enough to complete their qualification.
242. The persons with complete qualification for contributory pensions under the old scheme are those who are already in receipt of contributory pensions and those who, at 1st July, 1944, have at least five years of continuous insurance for pensions. The proposal made here is that, subject to the retirement condition mentioned below, all these persons should receive contributory pensions at the basic rate of 25/- joint (i.e. for man and wife) or 14/- single in 1945, rising every two years by increments of 1/6 joint or 1/- single up to the full basic rate of 40/- joint or 24/- single in 1965. On this proposal, all persons in this group will at all tunes have the same rate of basic contributory pension, irrespective of the date on which they reach pensionable age and claim pension. Those who claim in 1945 will get 25/- joint, rising to 26/6 in 1947, to 28/- in 1949 and so on. Those who claim for the first time in 1949 will come in at 28/- joint; they will not get more because they have contributed longer under the new scheme. The second group, i.e. persons with no qualifications for the present pensions, are in the main the new classes proposed to be brought into pension insurance, namely Class II (persons gainfully occupied otherwise than under contract of service), Class IV (persons of working age not occupied) and persons in Class I who hitherto have been excepted from insurance. All these persons will contribute for pensions for the first time under the new scheme. It is proposed that they should be required to contribute for 10 years before being qualified for any pension. Thereafter, i.e., from 1955 onwards, on reaching the minimum pensionable age and retiring, they will receive a basic pension of 25/— joint or 14/— single, rising by 1/6 joint or 1/- single-for every further year of contribution thereafter, the full basic rate of 40/- joint, or 24/- single being reached in 1965 for those claiming pension then or thereafter. Since persons in this group who are already within 10 years of pensionable age, that is to say, are over 55 for men or 50 for women at 1st July, 1944, may not be able to qualify for any pension, all such persons will have the option of applying for exemption from contribution for pensions, that is to say, will pay only that part of the insurance contribution which is required for purposes other than pension. As is explained below, many such persons may in fact be able to qualify for full pension by continuing to work and contribute after pensionable age. The third group includes persons who have made some compulsory contributions for pensions under the old scheme before 1st July, 1944, but have not the full qualification of five years’ continuous insurance up till then. It includes also the special voluntary contributors for pensions under the Act of 1937 who have subscribed for pensions and under present conditions can obtain them after ten years of contribution. The precise arrangements in regard to these classes must be defined by Regulations giving them the appropriate intermediate position between the first and second groups in respect of their formercontributions. These Regulations will presumably require insured persons to establish their claim to be in the intermediate group by some contributions made before the adoption of the scheme by the Government is announced.
243. The proposals in paragraph 242 make a distinction in the application of the rising scale of contributory pensions as between the first group of persons (with full qualifications under the old scheme) and those in the second group (with no qualifications under the old scheme). For the former group the rate of pensions rises by simple effluxion of time. All persons in this group at any one time will have the same rate of basic contributory pension; they proceed together up the rising scale of pensions, irrespective of the point at which they entered it and irrespective, therefore, of the number of contributions paid under the new scheme. The rate of pension for each individual in the second group depends not merely on effluxion of time but on the date after 1954 at which he retires on pension, that is to say, on the number of contributions paid by him under the new scheme; for he has made no contributions under the old scheme. A person in this group who claims pension as soon as he has contributed for ten years in 1955 will get 14/- as basic pension for the rest of his life. His pension will not go up in 1956, while a person who does not retire till 1956 will obtain not 14/- but 15/- a week. It is arguable that both classes should be treated alike, either in the direction of making pensions rise by simple effluxion of time in both cases or by fixing pension for each individual according to the date of his first claiming. The case for the procedure proposed in regard to the second group is that, on the whole, the people in this group have a relatively large number for whom pension provision is being made in other ways; it is not unreasonable to enforce a strict contribution condition upon them. The difficulty of applying the same procedure to the first group lies partly in the very differing contribution records before 1945 of those who will be in this group, and partly in the fact that to apply this procedure will mean that all those who retire and claim pension during the transition period will permanently have less than the full basic rate of pension, and thus if they have no other resources may be permanently in need of assistance. As this group includes most of the pensioners, it is important to frame a scheme which, so far as possible, will bring them all to the full basic rate and above need for assistance by the end of the transition period. If on further consideration of the equities as between the two classes it appeared desirable to treat the second group in the same way as the first group, and place all on a general rising scale irrespective of the date of claiming pensions and of the number of contributions old or new, this would increase the expenditure on pensions in 1965 by about £15,000,000 a year. If, on the other hand, it appeared desirable and practicable to treat the first group on the lines proposed for the second group, and make the basic pensions of the first group vary with the date when they claimed pension and the number of contributions paid under the new scheme—this would decrease the expenditure on pensions in 1965 by about £30,000,000.
Pensions Conditional On Retirement
244. Pensions have been spoken of above as provision for people who are past work. Pensions adequate for subsistence without other means should be given only to people who, after reaching a minimum age for retirement, have in fact retired from work. To give a full subsistence income to every citizen on his or her reaching the age of 65 or 60 would impose an unjustifiable and harmful burden on all citizens below that age. The practical problems of making pensions conditional upon retirement are considered below. They are certainly not insoluble, nor can imposition of a retirement condition for receipt of pension be described as a means test, any more than imposition of a condition that a man should be unable to obtain work, in order to obtain unemployment benefit, can be described as a means test. The pensions proposed in the Plan for Social Security are retirement pensions, not old age pensions. There is no fixed age for retirement, but only a minimum pension age, 65 for men and 60 for women, at or after which each individual has the option of retiring and claiming pension. Till he does so, contributions by or on behalf of him have to be paid in the same way as for all other persons.
245. Making receipt of pension conditional on retirement is not intended to encourage or hasten retirement. On the contrary, the conditions governing pension should be such as to encourage every person who can go on working after reaching pensionable age, to go on working and to postpone retirement and the claiming of pension. The large and growing proportion of the total population who will be above the pensionable ages of 65 for men and 60 for women, makes it essential to raise the average age of retirement, if possible, and in any case to avoid doing anything which may bring about earlier retirement than at present. It is neither politically feasible nor would it be right to raise the statutory minimum age for pensions. The capacity of different people for work late in life varies from individual to individual. To attempt to force people to retire before their powers and desire for work fail, and to compel them by a rise in the minimum age of pensions to struggle on after their powers have failed, are two errors and injustices which should be avoided by any system of social insurance designed to increase human happiness. The right way of encouraging postponement of retirement is to make it attractive for people who can remain at work after they have reached the minimum pension age to do so; such people should be allowed, by continuing to contribute and postponing claim to pension, to qualify for an addition to the basic rate which is given if pension is claimed at the minimum age. The object of encouraging continuance of work in later life will not be attained by granting pensions without a retirement condition. If these pensions are adequate for subsistence they will obviously encourage retirement. Even inadequate unconditional pensions will encourage early retirement in many cases. There are other superannuation schemes for some of which pension can be drawn only on retirement which may be earlier or later according to the choice of the individual; provision of universal unconditional pensions by the State will lead many people to take this with their other superannuation provision and retire.
246. The rates of pension named in the preceding paragraphs have been described accordingly as basic pensions; they are the rates for those who retire and claim pension as soon as they reach the minimum pensionable age. Any person who on reaching this age postpones claiming pension will have his pension increased in respect of each year of postponement. It is suggested that this increase should be at the rate of 2/- a week on a joint pension or 1/- a week on a single pension for each year of postponement added to whatever would have been the basic pension for that individual, if he had reached minimum pensionable age in the year in which he claims pension. The effect of this can be illustrated by considering particular cases of persons in the first and second groups respectively. A married man in the first group (i.e. qualified for contributory pension under the present scheme) who reaches the age of 65 in 1949, if he then retires will receive a basic pension of 28/- a week, which by 1953 will rise to 31/-; if instead of retiring he goes on working to 1953 he will be able to retire in 1953 on a pension of 39/- and will always have 8/- more a week than he would have had by retiring at 65. A married man in the second group (i.e. one outside the present contributory class) who reaches the age of 65 in 1955 and retires then will have a pension of 25/- and will remain always at that figure; if he postpones retirement for four years to 1959, his basic pension will be 31/- and he will have an additional 8/- in respect of continuing to work after the minimum pensionable age, making his pension 39/-. The increases for postponement after minimum pensionable age are designed to give to the individual some, though not all, of the saving in pension expenditure resulting through his postponement and are related, therefore, to the amount of the basic pension which is postponed. When the basic pension reaches its full rate in 1965 for both groups it would be appropriate to make the increase for each year of postponement greater. The question may also arise of imposing a maximum upon the amount of total pension.
247. Insured persons who postpone claiming pension on reaching the minimum pensionable age will continue to contribute in their respective insurance classes, I, II or IV, and to draw the working age benefits. It will be necessary to impose restrictions on the period for which unemployment or disability benefit can be drawn after the minimum pensionable age, and it may prove desirable to make the increased pension above the basic rate depend not simply on the length of postponement, but upon actual contributions paid. These are matters to be dealt with by Regulations. Such restrictions will be particularly necessary in the transition period, during which unemployment and disability benefit will be above the basic rate of pension.
248. The application of a retirement condition for pensions presents some administrative problems, but for the reasons given above a retirement condition is essential, nor can the administrative problems fairly be regarded as either insoluble or even exceptionally difficult.
First, the proposal to increase pensions if retirement is postponed and contributions continue to be made, will give all classes (I, II and IV) alike an economic motive not to claim pensions, while they are still able to work with any regularity. By these means they will be able to get the advantage of their capacity to continue at work after pensionable age honestly, without the subterfuges involved in pretending to retire and not really retiring.
Second, retirement means giving up regular earnings, not being idle 100 per cent, of one’s time. Every person receiving pension will be required to sign a periodic declaration either that he has earned no more than, say, £3 in each of the preceding 3 months or how much he has earned if he has earned more. From one-half to two-thirds of the excess above £3 a month will be deducted from his pension for the ensuing quarter.
Third, enforcement and detection of fraud presents no difficulties in the case of earnings by way of employment. The retired person will not be able legally to obtain employment, except through the possession of an employment book for which he will have to make application. Persons who continue to work after pensionable age without retirement will, as stated elsewhere, pay contributions in the ordinary way. It is for consideration whether those who take occasional employment after retirement should be able to do so as exempt persons (paying no contributions themselves though their employer pays contributions) or should pay contributions normally. But in either case they will need an employment book, whether marked for exemption or not, and the amount of their employment can be controlled.
Fourth, enforcement and detection of fraud in the case of gainful occupation otherwise than by way of employment raises greater difficulties. But under the proposals made here, this problem will not arise in the case of most of the people concerned (generally Class II or IV) for ten years, so that there is ample suggested that no person retired on pension would be permitted to hold an occupation card in respect of a shop, small holding, fishing boat, etc., that is to say, for every such means of earning, someone else would have to hold the licence ; that person might be the wife of the pensioner, but this would automatically have the effect of making the rate of pension single. The shopkeeper or small holder of advancing years will be able freely to do odd jobs and help in the shop, but he will not find it easy to carry on his business just as before and continue to draw pension as for himself and a dependant. It may not be possible, nor is it important, to control closely the earnings which a retired person makes by writing or personal service.
249. It may be argued that it is unreasonable to require retirement as a condition of pension, unless and until the pension is adequate for subsistence. This might be so if the object in view was to encourage retirement. That, however, is not the policy underlying these proposals. On the other hand, an individual who proposes to go on working and earning has no reasonable case for expecting an increase of pension or any pension for which he has not paid, just because he has reached a particular birthday. Those who already have unconditional pensions will be allowed to keep them unchanged till they choose to retire. But no fresh unconditional pensions should be granted after the day appointed for beginning the new scheme.
Safeguarding Of Existing Pensioners
250. In the application of the new scheme the position of all persons who at the beginning of the scheme, taken as 1st July, 1944, have pensions under the old scheme will be safeguarded. Those already in receipt of contributory pensions of 10/- a week without retirement condition will be allowed to retain their present pensions so long as they like continuing to work and to contribute; when they retire, will enter the scale at the appropriate point. The same principle of safeguarding existing pensioners will apply also to non-contributory means test pensions. If, as is possible, the means test for the larger assistance pensions proposed is in some way more
stringent than that for the non-contributory pensions now given at the age of 70, existing pensioners will keep the benefit of their present means test. The same principle will safeguard other special cases, such as that of women who were widowed before the Act of 1926.
251. The final rate suggested for basic pension (40/- joint and 24/- single) is the same as that suggested for unemployment and disability benefit. On strict subsistence arguments, it is possible to justify putting the rate of basic pension below the rate of working age benefit, say 37/- joint and 22/6 single. But there is strong public opinion in favour of securing for the aged something more than bare subsistence, and apart from this there is convenience in keeping pensions at least equal to working age benefits in order to avoid stepping down from benefit to pension on reaching a particular birthday. To keep the ultimate rate of contributory pensions to 37j- joint and 22/6 single will effect a saving only in 1965; by that time it is reasonable to hope that such a saving will not appear necessary.
252. There is nothing sacred about the number of years suggested here for the transition period; it is possible to argue for more or for less than 20 years. But the case for anything less than 20 years is not strong. A male employee who pays for 20 years from the age of 45 to 65 will have provided personally less than one-sixth of the value of his pension, having paid five-twelfths of the full actuarial contribution for the last 20 years of his working life in place of 49 years; an independent worker paying both the employer’s and the employee’s share will have provided less than one-third. Employees who contribute under the new scheme for the full 49 years – people reaching the age of 16 after the appointed day in 1944— will provide 42% of their own pensions; the compensation to them is that the State takes off them, largely by assistance pensions at once and wholly by contributory pensions in 20 years at latest, the burden of providing for their parents. From another point of view—that of giving time for re-adjustment of existing voluntary schemes of superannuation—a substantial transitional period is necessary. Given a sufficient provision of assistance pensions to those who need them the transition involves no hardship.
253. The joint rate of benefit and pension proposed, namely 40/-, assumes a rent of 10/-. The average rent in London is at least 6/- above that. Whatever be done to adjust unemployment and disability benefits to rent (either individually or by higher rates of contribution and benefit in London, as suggested in para. 214 above), retirement pensions must be uniform throughout the country ; they cannot fit the needs even tolerably unless rents are made more uniform. In effect the transition proposals made here allow twenty years for dealing with the rent problem, that is to say for reducing both the anomalous rent level of London and the acute individual inequalities which exist throughout the country. Meanwhile, during the transition period, abnormally high rents will be dealt with by supplementation or assistance pensions.
Conclusion
254. There is no valid objection, either on the ground of equity or on the ground that a means test may discourage thrift, to postponing introduction of adequate contributory pensions for a substantial period of transition, during which needs are met by pensions subject to means test. As regards equity, the people who reach pensionable age during the transition period will not have paid contributions at the new rates for any substantial time. As regards thrift, only those who are now so old that they may expect to require pensions before the transition period ends can be affected at all, and of these only a small proportion can be affected substantially. The rising scale of contributory pensions will make it possible for everyone except people who are already close to pension age, by a very moderate additional provision of their own, to secure income adequate for subsistence and have no need for any means pension. There is all the difference in the world between a permanent system of pensions subject to means test and a transitional system of supplementation of rising contributory pensions, such as is suggested here. The first must be rejected; the second is not open to serious objection.
255. There is no reason also to doubt the power of large numbers of people to go on working with advantage to the community and happiness to themselves after reaching the minimum pensionable age of 65 for men or 60 for women. The numbers of people past the pensionable age who, at each census, described themselves as still occupied rather than retired is very great. So is the number of those working as exempt persons after this age under the present schemes of health and unemployment insurance. There is no statistical evidence that industrial development is making it harder for people to continue at work later in life than it used to be; such evidence as
there is points in the opposite direction. The natural presumption from the increasing length of total life is that the length of years during which working capacity lasts will also rise, as health improves, as by freedom from want in childhood and by freedom from want and idleness in working years the physique and the courage of the citizens are maintained. A people ageing in years need not be old in spirit, and British youth will rise again.
256. The main proposals in regard to pensions in old age may be summed up as follows :—
(1) The Plan for Social Security includes the provision of pensions at basic rates equivalent to those for unemployment and disability benefit, that is to say, 40/- a week joint for man and wife and 24/- for a single pensioner, for all citizens without means test in virtue of contributions.
(2) These contributory pensions will be introduced gradually over a transition period of a suggested length of twenty years, during which the rate of basic pension will rise from 25/- for man and wife and 14/- for a single pensioner to the full rate.
(3) Assistance pensions will be available for all persons of pensionable age (65 for men and 60 for women) requiring them, on a uniform means, test based on the Determination of Needs Act, both in supplementation, of contributory pensions and for persons not qualified for any contributory pension.
(4) All contributory pensions under the plan will be retirement pensions; that is to say will be given only to people who have retired from work and will be subject to reduction of part of any earnings made after retirement.
(5) The basic rate of pension is that which can be obtained by people, retiring at the minimum pensionable age of 65 for men or 60 for women. Any individual postponing retirement after reaching the pensionable age will be able to qualify for additions to the basic pension according to the length of the postponement.
(6) The position of all persons now in receipt of pensions will be safe guarded, that is to say such persons will be able to draw contributory pensions at the present rate without retirement until they decide to retire from work and take pensions at the larger new rate.
(7) The application of the rising scale of contributory pensions may differ as between persons within the scope of the present contributory pensions and persons outside their scope (mainly Classes II and IV and persons in Class I now excepted from insurance), in view of the fact that the former will and the latter will not have paid contributions under the present scheme.
257. The transition period of twenty years will not affect any man under the age of 45 at the beginning of the scheme. Every such man, whether working under contract of service or on his own account or as an employer, whatever his occupation, will be able to qualify for pension for himself and for his wife at the full basic rate, equivalent to unemployment or disability benefit, and to add to this by postponing his retirement. Every single woman under 40 will be equally unaffected by the transition period; whether working under contract of service or independently or living at home and giving unpaid help to her family, she will be able to qualify for full basic pension and to add to it. A married woman who also undertakes gainful occupation will be able to qualify for full pension in respect of her own contributions and to draw pension when she reaches 60 irrespective of her husband’s age. The proportion’ of the population affected by the transition period in any way will he small/ Most of them will be able to get substantial contributory pensions, if not up to the full basic rate. Whether they do so or not, all of them will have security against want in a system of transitional assistance pensions. Nor does the proposal for a transition period mean that there will be no change in regard to pensions at once or during the transition. On the contrary, there will be rive immediate changes of great importance followed by continual change during the transition as the rate of contributory pensions rises. The five immediate changes are:—
(1) The administration of all provision for old age will be unified in place of being divided as at present between five separate bodies: Ministry of Health; Department of Health for Scotland; Customs and Excise; Assistance Board ; and Local Authorities (for Public Assistance).-.
(2) Pension rates for persons now within the scope of contributory pension insurance will be raised forthwith by 25 per cent, joint or 40 per cent, single, subject to the retirement condition.
(3) All persons of working age not now within the scope of contributory pension insurance will be brought in forthwith for contribution with a view to qualifying for substantial contributory pensions after ten years and full contributory pensions after twenty years.
(4) Persons not now eligible for non-contributory pensions will be able, on proof of need, to obtain assistance pensions.
(5) In so far as any pensions continue to be granted, riot as of right in respect of contributions, but subject to proof of need, needs and means will be judged on uniform principles in all cases. There will be a single test in place of several different tests as at present.