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Pension - a historical view

Article Summary: The thought of collecting pension when you become older, and no longer can support yourself and your family through a regular job, seems very familiar and obvious to us westerners. However, these thought and ideas are not as old and rooted as we might think; pension is actually a rather modern financial system. We do not have to travel very far back in history to see communities where a pension system was not even though of before.

The thought of collecting pension when you become older, and no longer can support yourself and your family through a regular job, seems very familiar and obvious to us westerners. However, these thought and ideas are not as old and rooted as we might think; pension is actually a rather modern financial system. We do not have to travel very far back in history to see communities where a pension system was not even though of before.

For people who lived a long time ago – and for many who lived in more undeveloped and poor countries today – the financial security when you got old was not your pension, but rather having your family and relatives take care of you. Therefore it was considered a wealth to have many children.

Let us have a look at Sweden’s pension system as an example. During the nineteenth century, Sweden was transformed from being a strictly agricultural country to an industrial one. Many large industries were built and people started fleeing the country side to start working in the new industrial communities instead. But so far there was no pension system instated yet. General pension from sixty seven year of age came into effect in nineteen thirteen. The first pension payouts were very low however. Pension levels improved nineteen thirty five.

Now imagine some of the poorer and undeveloped countries of today, further back in their industrial development than even Sweden was in the late nineteenth century. Pension systems have never been heard of here, and if they exist they have all been introduced very late. Another problem is that the average lifetime in many of these countries is very low, so not much money is being accumulated for pension.

However, the rich countries in the parts of the world aptly called “developed countries” (Europe, North America, Australia, New Zeeland and Japan) have a whole other set of problems concerning pension to deal with. In nineteen fifty less than eight percent of the population in these countries was over sixty five years of age. Half a century later it had climbed to fourteen point three percent. In two thousand and fifty we are talking about between twenty four and twenty nine percent according to different studies. The older part of the population is becoming larger and larger in numbers, and they are all living longer as well. This means more people need pension for a longer period of time. An increased life expectancy is seen in the entire world as a whole, but the increase is dominant in rich and developed countries that at the same time are seeing fewer parts of the population in the working ages. It then becomes obvious that widespread unemployment will be a huge strain on all welfare systems.

In many of these countries people are deeply concerned about how the pension systems will function in the foreseeable future. The future is yet to be seen, but many countries, like Sweden, have reformed their pension system to cope with these pending changes. Many other countries are facing similar changes in the near future.

Article Source: http://www.upublish.info

About the Author:
Robb Stark
Robb is writing about the history of pension with examples from the Swedish pension system, with the "avtalspension" and ITP.