What next for the basic state pension?

Anyone who doubts the relevance of looking backwards when considering pensions policy should look at the debates preceding the introduction of Britain’s first old age pension in January 1908. Arguments raged about cost, eligibility and the purpose of a pension distinct from poor law relief.

As one contributor to the debate put it ‘There must be something in the nature of an independent pension for the aged, disassociated from the poor law if an applicant has by thrift accumulated some small saving that is a barrier to his receipt of help ….’

Following the Beveridge Report in 1946 the basic state pension became a non means tested contributory system where flat rate contributions were paid and benefits received based on a contribution record. And although there is no fund in which contributions are accumulated, the link between contributions and entitlement is ingrained in many people’s thinking.

Now the purpose (and cost) of the basic pension is once again in question, with calls for means testing so that the pension is paid only to those who really need it.  As well as frustrating public expectations this may run counter to other policy objectives. Auto enrolment was designed as a way of ensuring that more people accumulated a retirement pot to supplement the state pension. How many people would still pay contributions if they knew that their hard-earned savings would reduce or disqualify them entirely from the state pension?

Pensions Archive Trust Director, Jane Marshall

This article was first published in the January 2025 edition of Pensions Age magazine.