Final Word

The lasting war of the pensioners

Pensioner.jpg

Social grants, of which so-called old-age pensions forms part, has turned into a political war zone in South Africa, but then, war of the blood and guts-type was never far off in history as far as pensions are concerned.

But, let’s start off with the origin of the word itself, as a column like this should.

The word pension arrived in Middle English somewhere between 1325 and 1375, taken over from Old French where it was, probably pronounced differently, but spelled the same.

The French in turn, got the word from the Latin word pēnsiōn, from the stem of pēnsiō, meaning a weighing out or paying, as we will explain presently, as the equivalent of pēns(us), past participle of pendere to weigh out, or said differently ’pay by weight.

It all start making sense if one recall that the currency for payment for, amongst other, services rendered at one stage in ancient Rome was salt weighed out to them. And that is where the modern word salary, as in paid monthly for work done, comes from.

The first ‘pension scheme’ dates back to 13 B.C. when Roman Emperor Augustus began paying pensions to Roman Legionnaires who had served 20 years. The troops’ pensions were financed at first by regular taxes, then by a 5% inheritance tax.

And, in more modern times pensions also started with the armed forces. In the 16th century, Britain and several European countries started offering pensions to their troops, starting with officers and gradually expanding to enlisted men.

The first pension scheme in the United States also started with the ‘fighting men,’ when a monthly lifetime income benefit was offered to soldiers during the American Revolution. If a soldier survived the war, the Continental Congress would reward them with income for life. It was called a pension, and it was offered again by the federal government in the Civil War and every U.S. war since.

By then the pension net started widening and after the Civil War, the U.S. government paid pensions to disabled or impoverished Union veterans or to the widows of the dead. Southern states paid pensions to disabled Confederate veterans.

Decades later the pensions to Civil veterans would become the basis on which the USA’s Social Security system was developed.

First civilian pensioner

The first civilian public servant in Britain known to have received a pension was an official with the London port authority. In 1684, he was paid half his working income — deducted from the pay of his replacement.

Widows' funds were among the first pension type of arrangement to develop and Duke Ernest the Pious of Gotha in Germany, founded a widows' fund for clergy in 1645 and another for teachers in 1662.

But it would take two more centuries before the concept of a broad civilian pension would really take off. The man credited for that is German Chancellor Otto von Bismarck, who in 1889 introduced modern civilian or social pensions. His motivation was political – to counter a growing socialist movement in Germany.

However, the idea of providing financial security for the aged gradually caught on and expanded throughout Europe, although until the 20th century, poverty was regarded as a quasi-criminal state. During Elizabethan and Victorian times in the United Kingdom, so-called ‘English poor laws’ the poor was still regarded as ‘morally degenerate,’ and expected to perform forced labour in state controlled ‘workhouses.’

This all changed with the introduction of the concept of old-age pensions the British Old Age Pensions Act in 1908. It offered 5 shillings a week for those over 70 whose annual means do not exceed £31.50.

New battle

What governments of the time, which generally lowered the ‘pensionable age’ to 60, did not foresee was to what extent the average life expectancy in developed, and to a lesser extent developing, countries would rise in modern times.

Now, governments are forced to revise and raising retirement ages to prevent aging populations from crippling their budgets.

At the time that Bismarck introduced his old-age and disability legislation the average life expectancy of Germans was 45. It has since risen to 70 years of age.

Since the recession of a decade ago (2007/2008) social pensions, in the words of one commentator, are “under the gun.” Governments that in the past had committed themselves to better public pensions began to fret that those they offered were already too expensive.

Final word

It is, however no simple matter, and present-day governments should while they are seeking solutions, take note of the opinion of some economic historians that it was a 

a growing army led to underfunded pensions, which led to the fall of Rome.

by Piet Coetzer

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Final Word

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