Pension and annuity: a few historical facts

This Post is in continuation of my Post of 29^th July, 2013 under the label ‘General Information’. As mentioned there pension is given to a pensioner (by the State or employer) without charging a price. Annuity is purchased by the annuitant paying a price.

A general impression exists that pension was started by Bismarck of Germany. Actually what he started was annuity and not pension. His Old Age and Disability Bill of 1889 provided for annuity from the joint contribution of workers, employers and the government. Bismarck was born on 1^st April 1815.

History tells us that the reign of Queen Gouri Lakshmi Bai of Travancore (now part of Kerala State, India) was from 1810 to 1814, i.e. before the birth of Bismarck. During her reign standardization of pension was carried out in Travancore through introduction of Scale of pension. (Obviously isolated individual pension payments must have been prevalent in Travancore). A couple of relevant references are given here: “In 1811, Col. HM Munro succeeded Col. Mecaulay as the Resident in Travancore with supervision over the kingdom of Cochin. He established reforms including courts, pensions…..”

[Quoted from History of Judicial system in the State of Kerala. En. wikipedia.org /wiki/ Kerala_High_Court]

“The next measure was to organize the financial affairs of the kingdom, the expenditure of the state having been found to exceed considerably the receipts of revenue, and Col Munro adopted efficient methods to maintain the equilibrium between the two. “All the establishments were modified and reorganized, a distinct and clear scale of pension for the chiefs and other dependants of the state was introduced, and a new scale of expenditure for the palace establishment was framed, and various other measures adopted.“ [Quoted from Full Text of A history of Travancore from the earliest Times..” www.archive.org/stream.-/a history travancoomenogoog__djvu.text”]. About Eight decades before Bismarck’s system was implemented in Germany    and even before his birth, Travancore had introduced a distinct and clear scale of pension for its chiefs and dependants.  Pension was a revenue expenditure of the State. This shows that old age pension was a contribution of Travancore to the world. In our next Post I shall discuss disability pension.