on monday April 3, the Conservative Party’s new pension scheme comes into force. People earning £9 or less a week will not be directly affected to any extent, but those earning more will feel its impact increasingly. Everyone at the top of the new graduated scale—that is earning £15 or more—will find his pay packet several shillings lighter, unless his employers have made arrangements to “contract out” of the scheme. In return for an increase of over 50 per cent in his contribution, plus subsequent increases already planned for, he will be entitled on retirement to an extra 10½d. a week for every year that he has paid it.

The briefest comparison of this return to outlay with that obtainable under quite unexceptional insurance policies makes it clear that the aim in introducing this new two-part structure is not primarily to offer contributors a better deal. Originally, the Tories claimed that their pension plan would increase national welfare more quickly, more effectively and above all more “soundly” than Labour’s—but this was during the 1959 election campaign. It was remarkably easy to pretend that they were simply offering a better way of achieving similar ends. To a financially unsophisticated electorate the main feature of both schemes was the introduction of a two-tier system, with a graduated element linking benefits and contributions to wages.

With victory won, active deception was dropped. Introducing their National Insurance Bill they gave three reasons for it—with welfare hardly prominent. These were: first, to establish the state pension scheme on a sound financial footing; secondly, to provide some sort of extra pension for mobile labour—workers in occupations where frequent changes of job are commonplace; thirdly, to encourage the growth of private pension schemes.

One economist in the insurance world describes the scheme as “a piece of political cowardice on the part of the Conservatives. At one time they undertook to be brutally honest and tell people that increasing costs must be borne by increasing contributions.” The electorate may not have been told this in so many words, and may still be happily unaware of what is in store, but they should get the message as the years go by.

There is at present a growing gap between payments made to the pensioners of today and contributions received from the pensioners of tomorrow. The Exchequer Supplement is running at £175 million and next year it will rise to £187 million. The main purpose of payments made under the graduated part of the new scheme is to help close this existing gap. It is hardly surprising that increases in contributions are not to be matched by genuinely comparable increases in eventual benefits.

But what happens when payments of the new pensions have to be made? For they will be higher, however slightly, as a result of the graduated element. This has been foreseen and allowed for. Command 629, the report of the government actuary on the financial provisions of the National Insurance Bill (1959), states that for the first twenty years contributions will have to be increased at five-yearly intervals, without any increase in the size of pensions. Each will range from 5d. at the basic £9 level to 9d. at the maximum relevant level of £15. In twenty years time the top contribution will be little short of £1 a week on present calculations. This is how national insurance is to be put on a sound financial basis.

The second aim, that of providing mobile labour with a little extra in the way of pension, is clearly going to be achieved. But the emphasis will be on “little”. No insurance company could hope to stay in business if it offered so little for so much. The companies offer much better terms simply because they have built up huge funds which are invested by experts. As industry grows so do they, and the value of capital keeps step with inflation. The Labour plan involved the government’s doing the same with consequent improvement to general welfare.