State pension, name applied to those pensions to which the aspirant contributes from salary or wages a certain agreed percentage during working lifetime. There are many in-stances of contributory pension schemes in the Brit. Commonwealth and U.S.A., and there is a marked tendency towards an increase of them. The British civil service pensions are not, however, fixed on a contributory basis, although it is generally, but not officially, recognized that the scales of emolument in the various grades have been fixed with the knowledge that in ordinary circumstances a pension follows at sixty years of age.
In the teaching profession, the universities. and education authorities have, as a rule, based their pension schemes on contributory lines. Old-establish business houses, banks, public utility companies and insurance companies have done the same. The contribution is made by the simple process of deducting the required amount from the monthly salary payment.
State pension were introduced into Great Britain by the Widows, Orphans and Old Age Contributory Pensions Act, 1925 (subsequently consolidated by the Widows, Orphans and Old Age Contributory Pensions Act, 1936). The Act provided old age pensions of 10s. and widow’s pensions at this same rate, with allowances for children, subject to contribution conditions. Originally the scheme applied to wage and salary earners, subject to certain exclusions.
By the Widows, Orphans and Old Age Contributory Pensions (Voluntary Contributors) Act, 1937—linked with the system of health insurance provided by the National Health Insurance Acts the so called ‘Black-Coated Workers’ Scheme’ enabled other persons (subject to age and income limits) to become voluntary contributors. The pension age for women was reduced to 60 in 1940. (The Old Age and Widow’s Pensions Act, 1940.) The Contributory Pensions Scheme was replaced by the comprehensive National Insurance Scheme as from 5 July.
The benefits granted by State Pension are of three types:
- Defined benefit: The amounts to be received in retirement are defined in advance and the contributions adjusted to result in these values in the future.
- Defined Contribution: Only when the worker requests the benefit to the pension fund, when he retires, that the value of the supplementary retirement is established. This amount is based on the accrued balance of the contri- butions and how much the operations yielded in the period.
- Variable Contribution: Applicable mainly in the case of benefits of unforeseen risks, such as death or disability retirement. It combines aspects of defined benefit and defined contribution.