by Dr Lawrence A Joseph
It has been well documented that prior to the 18th century the average life expectancy of persons was between 26 years to 40 years.
In general, a vast number of people died in instances where they were not physically inhibited from being engaged in employment but died as a result of the limitations in medical services. Today life expectancy is approximately 70 years. In days gone by, there were no recognisable state pension schemes which catered for paying any monies to retired persons. Military persons in the Roman Empire however did receive pensions. As the years passed the practice of retiring from one’s job after a certain age became operational since the 18th century. There became a need therefore for the establishment of pension schemes to cater for retiring persons.
It was not until the middle of the 19th century that State pension schemes began their embryonic stages of development. In fact, the first notable state pension scheme was established by the German Chancellor Otto Von Bismarck in 1833. It was then decided that everyone over the age of 65 years would be forced to retire and that they would be entitled to a pension. This initiative catered for contributions from employers, employees and government.
In the United States of America (USA) budding stages of state pensions reared their heads around the mid-1800s just after the period known as the Industrial Revolution. The Industrial Revolution mainly gelled in the United Kingdom from about 1760 to about 1840 during which time it spread to the USA. During that period there was a transition from quite a number of hand production methods to new manufacturing processes, the development of new chemical processes, iron production processes, steam power, the invention of a number of machine tools and the establishment of factory systems with assembly lines. Many jobs were created. In 1935 the Social Security Act was enacted which was a contributory pension scheme. Other subsequent programmes developed.
It was firstly in the United Kingdom that the Industrial Revolution economically stimulated that agrarian society. It created a lot of jobs but workers all over were reluctant to retire because there was no scheme in place to cater for their needs after retirement. Moreover, a lot of young people became frustrated because they thought that the older heads were preventing them from getting employment. This impasse was considerably appeased with the passage of the Old Age Pensions Act in 1908. This Act engendered the right conditions for a credible state pension scheme to take root. After the passage of that Act and the enactment of other similar welfare provisions older persons began to feel more secure about maintaining a reasonably satisfactory life after retirement.
The idea of having pension schemes was then put into effect in many of the then colonies of the United Kingdom. In Grenada there were the Police Pensions Act of 1931, the Pensions (Prison Officers) Act of 1935, the Pensions (School Teachers) Act of 1943 and the Pensions Act for public servants of 1950. These were all non-contributory pension schemes where government alone made contributions. Payments of pensions to all the above-mentioned public sector workers were done in accordance with their respective Acts. However, the People’s Revolutionary Government (PRG) stopped payments to all persons who commenced employment with government after 4 April 1983 by the Pensions (Disqualification) Act of 1983 and mandated that those persons must be paid under the National Insurance Act of 1983. The above-mentioned date was later validated to 22 February 1985 following the decision in the Hermilyn Armstrong case. The provisions of the Pensions (Disqualification) Act have since been incorporated in the abovementioned Pensions Acts and are valid provisions.
The age of retirement for public sector workers has been established as 60 years in Grenada. In many other countries the age of retirement has been higher. For example, in Australia, Denmark, Spain and the UK it is 65 years but there is a plan to gradually increase that age to 67 over the next few years. It is most imperative that Grenada gives serious consideration to also increasing the retirement age over time as people are generally living much longer than before. The longer one lives is the more pension benefits that will have to be paid out. The longer one works is the more contributions that one will have to make to the pension scheme. If a government is not careful and does not pay due regard to professional actuarial studies, a pension scheme may well end up not being able to meet its financial commitments to pensioners in the future. Grenada may well need to raise the retirement age from the present 60 years and also give due consideration to establishing higher percentages of contributions from employers and employees in order to maintain a credible pension scheme for the future.