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The state pension is still only a fifth of average earnings – as it was 100 years ago. But it’s not all bad, because the price of many things has dropped, says ROGER ANDERSON
You’d have thought that civilisation might have upped the ante a bit since the old-age pension was introduced by Lloyd George in the first decade of the last century. Far from it. With a few notable exceptions, successive governments have been very stingy indeed.
It’s true that the five bob a week (25p) awarded to the needy in 1909 has been described by one historian as ‘a paltry amount’. And even then pensioners got it only if they were deemed to be of ‘good character’.
However, although the country has become seven times richer in real terms over the past 100 years, the basic state pension has increased just fourfold in terms of what it can buy. And that was from a very measly start.
Moreover, for some items, a basic pension now will buy no more than five bob would have bought then. Take beer, for example. In 1909 a state pension would have bought you 30 pints (not that you would have received a pension at all if you were habitually drunk). And that’s pretty much the same as the basic pension will buy you now, at least down at my local.
More telling is that, as a proportion of the average wage, the basic state pension hasn’t really changed for more than 100 years. It was mean when it started off, and it’s still mean today.
As a child in the mid-Fifties, I remember walking to the post office with my grandfather to pick up his pension. In 1955 that would have been £2 – just under a quarter of the average weekly wage of about £8.6s. Average earnings now are £504 a week. That makes today’s weekly pension of £102.15 just over a fifth of the average pay packet. Go back to 1909 and, guess what, the five bob pension is about a fifth of the then average wage of £1.7s.
Even so, the fact is that, over the century, the price of many essential items (apart from beer, that is) has dropped considerably in real terms, so the amount your pension will buy has increased hugely. Let’s take a look at what five shillings could have bought in 1909 (thanks to that year’s edition of Mrs Beeton’s Everyday Cookery).
A thrifty trip to the grocer would probably have cost you the amounts on the shopping list on
Take beer... In 1909 a state pension would have bought you 30 pints – not that you would have received it at all if you were habitually drunk
5 shilling shopping list, 1909 ★ A quarter of a pound of ham (3d) ★ 3 white loaves (6d) ★ 2 lb of sugar (5d) ★ 3 pints of milk (6d) ★ 1 lb of cheddar (10d) ★ 1 dozen large eggs (2s) ★ 2 lb of onions (2d) ★ 1 lb of eating apples (4d)
the left. That’s a pretty frugal bag of shopping, but in 1909 it would have set you back five shillings – all your pension gone, and a week of butterless cheese and onion sandwiches to see you through, with a little bit of ham on Sunday.
By 1935 pensions were no longer means-tested and had increased to ten shillings a week. And with prices increasing only a tad, the same shopping bag would have left you with about half your pension to spend on other necessities. Things have continued to improve to the present day.
8 OLD MONEY March 2012 State pension
Relative value of ham and eggs, 1909–2011
Ham (p per 1/2lb) Year
% of basic pension Eggs (p per doz)
1909 1935 1960 1970 1980 1990 2000 2011
2.1 5.5 22.35 27.75 90.25 167 192 300
10 7.5 29.5 23.2 72 121 168 170
48 26 21 10 7 6 5 5
In 1960 the state pension was £2.10s a week and this shopping basket would have added up to about £1. By 1970 the bill would have been down to about a quarter of the pension, and by 1980 only 17 per cent. A couple of weeks ago, at my local supermarket, the same goods cost £13.77 – about 13 per cent of the current pension.
Of course, relative values have changed hugely over the past century. For example, in 1909 a dozen decent eggs were four times as much as half a pound of ham. These days it’s massively the other way around – the eggs being half the price of the ham, as you can see from the table above.
But let’s say you wanted to spoil yourself with a decent-sized bar of Cadbury’s Dairy Milk (200g). In 1909 you could have bought ten bars at sixpence a bar and that price remained exactly the same until 1940, when chocolate was rationed. By 1960 it was still only just over a shilling a bar, but by 1970 the price had doubled. These days such a bar costs just under £2. But at least your current pension will buy you 50 of them. That’ll go down well with the beer – or perhaps not.
On a more serious note, housing costs for pensioners are more difficult to judge – with relevant statistics hard to come by.
At the turn of the last century many pensioners would have lived with their families; and 90 per cent of households rented then, against about 30 per cent now. The average rent for a house in Greater London was 13s.9d – well
However tight-fisted successive governments may have been, the real value of the state pension is just as good as it has ever been out of reach of a pensioner on five shillings a week. Even a room in London would have cost between 2s.9d and 3s.6d a week.
These days the average weekly housing association rent in, say, Hammersmith, is £100 – relatively cheaper but still out of reach for many, were it not for housing benefit. What’s more, the rent has doubled over the past 14 years, whereas pensions have increased by only two-thirds. So housing may have become somewhat more affordable for pensioners over the century, but over the past 50 years the rising cost of a roof over your head has seriously worked against pensioner affluence.
What about a day out in Brighton? Until the mid-1960s train fares were based on the very simple formula of a fixed rate per mile. Pre-1914 this was a penny for third-class passengers – making a third-class single fare from London to Brighton about five shillings. Yes, that’s expensive. But by 1960 the rail fare was still only tuppence a mile (perhaps explaining why the railways got into such a financial mess). Today, a standard secondclass single to Brighton is £24.70 (and, of course, even cheaper with a rail card). Much more affordable – or, for a pensioner, there’s always the far longer, but free, bus ride.
In fact, the good – and perhaps surprising – news is that, however tight-fisted successive governments may have been, the real value of the state pension is now just about as good as it has ever been. Mind you, it would have been a lot better had Margaret Thatcher, in 1980, not broken the link with the rise in average earnings introduced by Barbara Castle in 1974. Happily, from this year that link is to be reinstated.
So, if it’s any comfort, if you are relying solely on the basic state pension (and of course most people these days don’t) you can certainly think yourself lucky that you are not back in 1909 – in a squalid little room, living on a diet largely consisting of pease pudding, vegetable broth and bread and margarine.
‘We’ve reformed your pocket money’
March 2012 OLD MONEY 9