Articles - Pensions Past and Present

Aviva celebrates its 325th anniversary this month. This is an opportunity to delve into our archives to look at how pensions have changed over the years. What might be surprising is that many of the past problems and solutions still hold true today. One of Aviva’s first pension customers was a pilot from Dover – a pilot of boats, we assume. In 1809, at the age of 73, Mr Godlove Luck purchased an annuity for £400 to provide an annual sum of £70 per year. In today’s prices that’s a pension pot of just over £33,000 and an income of £5,782 a year.

 By Dale Critchley, workplace pensions policy manager at Aviva

 Mr Godlove Luck hadn’t just managed to squirrel away a tidy sum, and without the help of tax relief - which would have increased the pot to £41,250. 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. Life expectancy for a 70-year-old man would have been around 8 years on average back then.

 A 70-year-old today would be expected to live on average for 16 years, with a 1 in 4 chance of living for another 22 years. This can be a major headache for those trying to work out a sustainable level of income withdrawal. Annuitisation in later life might be the answer for some – as it was for our Dover pilot.

 Today, the dream for many is to retire at an age when retirement can be enjoyed to the full. The archives reveal it was a similar aspiration for people in 1810, when Aviva started to offer deferred annuities. A schoolmistress from Fakenham aged 36 bought an annuity of £50, to start when she reached 52 years old. A farmer aged 31 from Stourport purchased an annuity of £40, to commence when he was 50 years old. 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.

 Our young wharfinger was a great example of a 19th Century ‘early-adopter’ thinking about retirement income and engaging with pensions. This must have been someone who realised that to build up a decent sized pension pot, it’s important to start early.

 Aviva, it seems, was also ahead of the times – relatively speaking that is. Its 1940’s adverts were aimed at encouraging women to save into a Woman’s Pension Policy – already highlighting the Gender Pension Gap that we still see today. The adverts eulogised, ‘wise saving, prepares for the future, forms a sound investment, and makes you an independent bachelor girl’ – and it 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.”
 While the language may appear archaic today, it was forward-thinking for its time. The message is still valid today, that women should make sure they prioritise their pension provision appropriately

 The archives also found a 1940’s marketing message encouraging employers, to 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”.

 It sounds much like a nod to today’s auto-enrolment. Unfortunately, today’s ‘old George’ might not get the expected retirement income if minimum contributions are relied upon. Increasing contributions must be a priority. As a first step, Aviva is supportive of changes to auto-enrolment proposed for the “mid-2020’s”, which could go some way to solving an issue identified in the mid-20th century.

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