Margaret Thatcher came to power in 1979 determined to control the growth of public expenditure, cut government deficits, and scale back the role of the state. As soaring unemployment placed upward pressure on social spending, however, the size of government increased rapidly during her first administration. When Nigel Lawson took office as Chancellor of the Exchequer in 1983, he sought both to reverse this disappointing trend in the near term and to hold down the long-term trajectory of government spending. While immediate cuts to programs such as defense and education helped the Chancellor pursue near-term fiscal discipline, pension reform would play a central role in his longer-term strategy. Old-age pensions were, on the one hand, a spending category in which quick savings were hard to achieve because current beneficiaries had come to depend on past benefit promises. At the same time, it was an area of expenditure that was scheduled to grow automatically over the next several decades as the ranks of retirees swelled.

Accounts of the British pension reforms of the 1980s – especially those that set it in cross-national perspective – typically emphasize their relative radicalism (Huber and Stephens 2001a; Bonoli 2000). Thatcher's success in dismantling Britain's public retirement programs is usually considered dramatic by comparison, for instance, with Ronald Reagan's modest cutbacks to Social Security (Pierson 1994). This conventional view of the British reform outcome, however, occludes two important features of the case.