Pensions: Learning lessons from our ancestors

Dale Critchley delves into our archives to look at how pensions have changed over the years. And found there’s a lot we can learn...

If you’re not yet retired and want to know what it might be like to live on a pension, you’d be wise to consider the experiences of an older person.

How much older? Try someone born in 1736…

Times may have changed somewhat since then, but we may still be able to take something from the example of a certain Mr Godlove Luck, one of Aviva’s first pension customers. Mr Luck was a pilot – of boats, we assume – from Dover. In 1809, at the age of 73, this gentleman purchased an annuity for £400, to provide him with the sum of £70 per year. In today’s prices that’s a pension pot of just over £33,000, and an annual income of £5,782.

Mr Godlove Luck had managed to squirrel away a tidy sum for the time, and we have to remember that he did so without the help of tax relief, which would have increased the pot to the equivalent of £41,250. But that’s not all. He had also worked out that buying an annuity later in life can provide a larger guaranteed income.

Of course, the annuity would have been based on 19th century life expectancy. On average, a 70-year-old man might be around for just eight more years back then.

A 70-year-old today would be expected to live on average for 16 years, with a one-in-four chance of seeing another 22 birthdays. Though this increase is wholly good news, it can be something of a headache for those trying to work out a sustainable level of income withdrawal. For some, annuitisation in later life, rather than immediately on retirement, might be the answer. Just as it was for our Dover pilot.

The benefits of an early start

Today, the dream for many of us is to retire at an age when retirement can be enjoyed to the full. Aviva’s archives reveal it was a similar aspiration for people in 1810, when our ancestor businesses started to offer deferred annuities:

  •  A 36-year-old schoolmistress from Fakenham bought an annuity of £50 a year, to start when she reached 52.
  • A farmer aged 31, from Stourport, purchased an annuity of £40 to commence when he was 50. It cost him £5 and sixpence per year.
  • A wharfinger – or harbourmaster – aged just 24, also from Stourport, purchased an annuity of £50, for £4 and fivepence a year, to start when he reached age 61.

It seems like pension engagement in the 19th century wasn’t restricted to the older generation. This far-sighted 24-year-old had worked out that the secret to building up the largest possible retirement income was, and still is, to start early.

An example to wharfingers everywhere. And the rest of us, perhaps.

Timeless aspirations

The reason for having a pension is something that hasn’t changed. It allows us to save while we’re working, so we can enjoy later life. Or, as Aviva’s forebears declared back in 1820:

“By purchasing a deferred annuity those who are at present able to procure livelihood, may provide a comfortable support for themselves, when they shall have arrived at an age at which the ability to labour may be lessened, or exertion become irksome.”

We were also quick to identify the potential gender pension gap, with marketing in the first half of the 20th century aimed at encouraging women to save into a pension plan. An advert from 1940 offered encouragement that “wise saving prepares for the future, forms a sound investment, and makes you an independent bachelor girl”

It went on to read:

“Do not wait in the hope that the future will be a bright one – the “tall dark stranger” may never materialise! MAKE SURE you will be independent by means of a Woman’s Pension Policy with the Norwich Union.”

The wording may be archaic – to say the least – but the message, that women should make sure they prioritise their pension provision appropriately, remains valid.

What it takes to help workers engage with their pensions

And finally, a marketing message aimed at employers who might be wondering whether they should do more to promote workplace pension saving:

“Old George is getting past it! He’s given his firm nearly half a century of loyal service. Now, with age beginning to tell, and no longer quite equal to his work, he’s altogether a bit of a problem. Perhaps a light job, to keep him occupied, could be found in some other department? Or the firm might find the money to do something for him? But how very much better, for himself and for the firm, if he automatically received a pension at retiring age”.

We’re not claiming that this was the idea that turned into automatic enrolment, but it does promote the progressive notion that George should get his workplace pension automatically. This is something we should all encourage – but suggesting that employees might be ‘past it’ isn’t a path any of us will be going down again any time soon.

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