There are several tests by which one might judge a system of pensioning for old age. A sine qua non is that it should be affordable by the employer and/or employee. Equally fundamental from the point of view of the employee is that the lifetime savings implicit in a pension scheme should lead to secure build-up of entitlements sufficient to support old age retirement. The private occupational pensions movement, at least until recently, has quite failed to meet this test. In the twentieth-century decades taken as a whole, neither the majority of those who have been members of occupational schemes nor the majority of their dependants have ever drawn a pension of any kind. In the early days this was quite often because death intervened, and widows' benefits were not initially well developed. Even in schemes designed in the days before the First World War for middle-class employees (with their greater longevity), it was usually expected that, of those who joined at age twenty and stayed with an employer throughout their working life, more than four in ten would be dead before they reached the normal retirement age of between sixty and sixty-five.

The idea of retirement has a long and venerable history; but the twentieth century has fundamentally transformed its nature. Modern retirement practice has a number of distinct characteristics. First, it is a general rite of passage which almost all adult employees can now expect to undergo. Second, it is more likely to be compelled at a fixed chronological age, rather than to be initiated by failing physical or mental powers. And third, the financial status of the retired has greatly improved, so that this form of retreat from the world of work is less commonly seen in negative terms than was once the case. These diverse elements have given rise to a rich variety of interpretations of the reasons for the modern growth of retirement. Radicals on the libertarian right and the socialist left alike have interpreted it as the product of unjustifiable discrimination against the old. Others, by contrast, have seen it as the virtuous consequence of the greater choices provided by increased wealth, greatly augmented by the modern spread of pensioning. This ambivalence in the image of retirement is, moreover, reflected in the mixed trauma and relief of those undergoing the retirement experience.

Retirement was not invented in the twentieth century; but it did then become the eventual lot of the majority of British employees and its terms were then fundamentally rewritten. This book is about the way that occupational pension schemes have shaped these profound changes. In recent years, economists and others have come to appreciate the important role of pension schemes in employment contracts, in the distribution of wealth, in social welfare policy, and in the capital markets; but historians have not explicitly addressed their studies to the origins and purpose of our pensioning system. Why do employers, rather than individuals, or, as was once the case, trade unions, now organize old age saving? Why do employees have less control of the resulting pension funds than they used to? Why do most people now retire, often compulsorily at a fixed age? Why has Britain paid such poor state pensions and depended so heavily on occupational pensions? Why are pension rights protected well against inflation for workers who remain with one employer but miserably for those who change jobs or for most occupational pensioners after retirement? These questions address issues which in one way or another have concerned employers and employees for a century or more. I hope that the historical perspective provided by this book will enable those who are attempting to answer them now to understand better the constraints and opportunities which the legacy of the past provides.

The rising pressure by the local poor law authorities to limit expenditure on the old was paralleled from the 1870s by a growing tide of opinion favouring a national system of pensions to deal more generously and comprehensively with the problem of old age poverty. Opponents of state pensions advocated self-help and pointed to the disincentive effects of state nannying; supporters suggested that a national pension system would be more likely to encourage thrift if pensions were given widely and without the penalties associated with the poor law. There was some division among supporters on whether national pensions should be contributory like Bismarck's scheme in Germany or financed from general taxation. Gradually the supporters of state pensions gained political ground. Middleclass social reformers pointed to the extent of poverty in old age shown by social surveys, and politicians were increasingly conscious of the potential popularity of a more humane system of pensioning among the working classes. The labour movement, initially hesitant about old age pensions, switched to supporting them by the first decade of the twentieth century, and this may have been one factor propelling the Liberal government of 1906 toward a national scheme.

Pension schemes, when they were inaugurated, usually promised a level of retirement benefits in an apparently firm formula, which was felt, at the time, to suit the needs of employer and members alike. When retirement came – forty years later for young members of newly inaugurated schemes – it was rare for the original benefit structure to have been retained. The twentieth-century experience so far thus suggests that pension promises are not firm, but are subject to quite frequent alteration. As we saw in the previous chapter, alterations are subject to certain legal safeguards, but are principally determined by the needs of the employment contract and the financial well-being of the fund. These factors might be expected to produce a rich variety in pension benefit formulae, and in the past they have done so. More recently, however, there has been a remarkable convergence of pension schemes on what appears to be a standard design.