80 years on from VE Day and the birth of the state pension
Edmund Greaves explores how VE Day laid the foundations for the UK state pension, and why that legacy is now under strain.
The UK and other Western countries mark VE Day on 8 May – the 80th anniversary of the cessation of hostilities in Europe.
Now, your first question of this regular column might well be what has this got to do with money, Edmund? Well, I’m about to try and make the link. Here goes.
VE Day was the ‘end of the end’ – the day Britain, America and their allies won the war in Europe against Nazism.
Setting aside the profound geopolitical consequences of the war, the untold death and destruction and everything else that the war did – it created a very specific set of circumstances in Britain that continue to influence our financial lives to this day.
On VE Day in 1945, millions of soldiers, workers and citizens breathed a sigh of relief that the time of jeopardy was over.
It was a punctuation point in our history, which led to an historic election victory for Clement Attlee’s Labour – one of the most consequential Government’s in modern British history.
Not just for the creation of the welfare state and the NHS, but because it formally established the state pension.
The idea was initially floated in the 1942 Beveridge Report – widely circulated among soldiers serving around the world and setting a blueprint to repay the working classes for their sacrifices across two devastating global conflicts. As a part of that, social economist William Beveridge, after whom the report was named, proposed a universal state pension to offer workers a safety net in old age.
With the return of millions of conscripted men (around five million British men served during the entirety of the conflict), the 1945 election became very much one of settling the modern state’s social contract.
The quid pro quo was that two generations of working people had given years of their lives, and often gave up their lives, to deliver a new Britain. The state pension was to be a cornerstone of this.
In 1946, the Labour Government passed The National Insurance Act, and the state pension was born. The system came into effect in 1948.
The State Earnings Related Pension Scheme (SERPS) came along in 1961. The link between earnings and pension was broken in 1980 and SERPS were ultimately replaced by the Second State Pension in 2002.
Fast forward to today and we have the ‘new’ state pension. I shall refrain from going into the many (and complex) reasons why the state pension is broken in 2025 and why its long-term future is in doubt (and very much doubted, the younger the taxpayer gets).
But some of the blame lies with how it was created in the first place. This chiefly comes down to no one at the time ever foreseeing just how much better life expectancy would get in Britain, thus making the affordability of the benefit much more problematic.
Suffice to say, the state pension was created to repay the unimaginable debt owed to those who stood up to fight for the future of our merry island. It is unfortunate, 80 years on, that its legacy and future is deeply troubled.
What’s coming up in May
There’s plenty on the docket for May 2025, with the Bank of England set to deliver a rate decision on 8 May. This is preceded on 7 May by a US Fed rate decision.
We’ve got local elections in England on 1 May, while Australia has parliamentary elections on 3 May. This is the same day that the US is set to impose 25% tariffs on car part imports.
Office for National Statistics (ONS) employment and wage data is on 13 May while we’ll get Q1 GDP figures from ONS on 15 May. Inflation figures fall on 21 May.
Finally, MRM’s Mortgage Roundtable Report ‘The Mortgage Market in 2035’ is due to launch on 19 May. Do get in touch to find out more.
All the best from everyone here at Octo, MRM and Mouthy Money.