An annotated history of pensions

Published 11:42 am Tuesday, September 5, 2023

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As I prepare to hit the half-century mark next year, certain things are starting to change. Doctor appointments are much longer than they used to be, and I now take many more pills. Trying to guard undergraduates on the basketball court is proving impossible.
The other day I calculated how many more years I have until I can receive my pension.
For something that I have never given much thought to, I am now seeing it as a blessing. My teacher’s pension works on a rule of 90; when my age and number of years worked equals 90, I can retire and start receiving a portion of my wages.
Before now, I assumed that outside of Civil War soldiers, pensions were probably created during the Great Depression with the New Deal. Before that people lived much shorter lives and were taken care of by their families as they aged then. Today we tend to think of any kind of cradle-to-the-grave protection as modern, but pensions actually began with the ancient Romans.
One of the ways Roman armies filled their ranks was through “annona militaris” or a payment for life after soldiers left the service.
All through the ancient world and into the Middle Ages similar systems served as incentives for military service. These incentives came across the pond to the Americas. British colonies did not have a professional military and so relied on militias.
With the onset of the Pequot War in 1636, the New England government needed a way to convince more men to join a lengthy military campaign, so they passed a law stating, “It is enacted by the Court that if any man shalbe sent forth as a souldier and shall returned maimed hee shalbe maintained competently by the Collonie during his life.”
While the Virginia colony had a better relationship with the Natives than their northern neighbors, they still struggled and began displacing the Natives from their lands. Virginia passed similar legislation in 1644. These pensions only covered men who were injured. In 1675, during King Phillip’s War, the Legislature passed legislation that also provided for families of soldiers who were killed or maimed during the war.
The first federal pension was granted during the Revolutionary War to any soldier wounded and could not provide a living for himself. However, where things really started to change was with the Civil War.
Beginning in 1862, federal pensions were only for Union soldiers – both Black and white – which is interesting because the war started in 1861 and the original enlistments were for three months with the expectation that the war would not last longer than that. As the war went on, only soldiers who stayed were eligible for pensions. Those were paid to veterans who were disabled from the war, or if the soldier was killed, benefits went to their widow or dependents.
With the onset of the Progressive Era (1900-1929), views of pensions and government assistance began to change. People were looking more to government for help.
A vast majority of Union soldiers were farmers or other type of manual laborers. As they aged, they found that their war scars – both visible and invisible – affected them. There was a push to have pensions cover those who were no longer able to work even if their injuries were not directly from the war. At a time when Democrats were the party of smaller government, Democratic President Grover Cleveland vetoed any bill that attempted to increase pensions. His objection is considered one reason for his defeat in 1890 when Republican Benjamin Harrison was elected president. Harrison quickly signed the Pension Act of 1890 opening the pension to any honorably discharged soldier who served more than 90 days. Widows who did not remarry could now receive pensions if their husbands died from any war-inflicted injury. Making up about 40% of the budget, the new cumbersome pension rules created the largest federal government expenditure of its time and also helped secure Republican dominance until 1932.
Private Pensions
As for private companies, the first to offer a pension was American Express. The shipping company was created in 1850 when the merger of two shipping magnates – Henry Wells and William G. Fargo – created the more famous shipping company Wells Fargo in the West while American Express focused on the east. In 1857, American Express expanded its business to include money orders and later created travelers checks to help those traveling abroad who had to rely on letters or credit which they could not always get. Much later they got into the credit card business. “Don’t leave home without it.”
In 1875, Wells was trying to find a way to incentivize employees to remain with the company and build loyalty. He took a page from the military and began offering employees serving more than 20 years a three-part pension plan.
First, employees would pay a portion to the pension fund that also included matching funds from the company. Secondly, to be eligible for the pension fund employees must work at least 20 years and be at least 60 years old. Finally, after retirement, the employee would receive a regular pension check to assist them with living expenses. The plan worked and Wells got the loyalty he hoped for. American Express’ success inspired other major companies like railroads and banks, to follow suit. But most Americans did not work for theses companies and did not receive any type of assistance until the 1920s or more likely in the 1930s with Social Security.
Retirement, Social Security
The big move in 1920 was the Civil Service Retirement Act where government employees paid in a percentage which was matched by the government. It is important to note that when Social Security was created in the 1930, federal employees were exempt from paying into the new program and only paid into CSRA or later the Federal Employees Retirement System. Though Social Security is not a pension, it acts as one. And starting in 1935, anyone of retirement age or their dependents of who has earned enough work credits is eligible for Social Security.
The government incentivized more companies to create pension funds when it passed the Internal Revenue Act of 1921 which allowed companies to write off contributions to pension funds. More businesses, including manufacturing companies, began offering pensions. The next big jump occurred in the 1930s and 1940s as Franklyn D. Roosevelt’s administration passed laws that allowed for the creation of labor unions. The new unions made pensions a large part of their collective bargaining. By the end of the 1950s, about half of the American workforce paid into pension plans.
Starting in the 1980s some workers began investing in private 401(k)s where they could invest tax-exempt funds to supplement Social Security or pension funds and enjoy themselves more in retirement. No longer did most have to work till close to death or hope they had families who take care of them in their old age.
Pensions are not new, but they did go through major changes in modern times. While once they were meant to strengthen the ranks of the army, they are now used to build loyalty to companies and help a population retire that is living a much longer than ever before.
(James Finck, Ph.D., is a professor of history at the University of Science and Arts of Oklahoma and writes for the Southwest Ledger. You can follow Historically Speaking on Facebook or at

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