Pensions and benefits

Workplace pensions – the old-fashioned kind that set income in retirement as a percentage of the last year of salary earned – sat at the core of industrial modernisation after the second world war, writes Norma Cohen.

In the US and the UK especially, officials set wage and price controls to contain the threat of destabilising inflationary spirals amid postwar reconstruction. But those controls coincided with a manpower shortage – pension benefits could be used to attract and retain workers. Both countries experienced a surge in birth rates. With growing numbers of workers contributing to retirement savings and few pensioners collecting benefits, along with double-digit returns on investments, pension promises were a low-cost incentive. In addition, high marginal corporate and personal tax rates made pension contributions cost-effective.