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The origin of pensions

Conocer el origen de las pensiones es una forma de entender por qué existen y de saber lo que las ha traído hasta nuestros días.

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Many of the things we take for granted today are actually inventions that did not always exist. That is certainly the case with the retirement pension and benefits in general. It is a human invention that has not been present in all civilizations, although it almost always has.

Knowing how pensions originated is a way of understanding why they exist and how they have arrived at the present day. Way before the current pension system, the Romans had invented a method for guaranteeing a dignified retirement for their elders and soldiers.

In fact, even before they created the first proper retirement pension, they devised a system for caring for the elderly: the Lex cionaria or Stork Law.

According to this law, children had a duty to take care of their parents and grandparents, just as storks do when they are young and begin to fend for themselves. This obligation has been carried over to the present day with certain nuances.

Specifically, Article 143 of the Civil Code regulates the obligation to “provide maintenance”, which is effectively the equivalent of this Roman duty. Denying such assistance and care to parents is one of the grounds for disinheriting heirs and excluding them from the inheritance.

The origin of pensions: it all began in Rome.

The Lex cionaria was an early attempt to address the need to assure care for people who were struggling to look after themselves. However, the origin of pensions per se and retirement came later.

The first pensions were for the military, who were at the heart of the Roman Empire’s success. With this in mind it is easier to understand why the word retirement in Latin (jubilare) means to shout for joy, as it meant no longer risking one’s life in the army.

The Aerarium Militare was established by the emperor Octavian Augustus as a reward for soldiers after they had completed a certain number of years of service and also as a solution to the problem of war veterans following the professionalization of the army.

This pension was given as a one-time benefit or praemium, meaning the soldier received his pension in a lump sum. This pension represented approximately twelve years of salary for a legionary and varied according to the service rendered, as did the eligibility conditions for the pension. Discharged veterans could choose between this payment or a plot of land.

Initially the Praetorian Guard, who served as escorts for the emperors, had to serve 12 years in office, which was soon raised to 16 years. The legions, on the other hand, first had to serve 20 years, which became 25 years, and non-citizen soldiers with auxiliary duties had to serve 26 years.

Of course, not all soldiers reached the end of their 25 years of service. Many died before they could retire and collect their pension, as is still the case today. However, the difficulty of maintaining the system, especially at the end of wars and in times of peace, was already apparent during the Roman Empire.

So much so that the Roman Empire faced difficulties when it came to covering these pensions, which were financed by Augustus’ initial input and then, later on, taxes. One of the solutions for tackling the problem was to extend the length of military service, which is not unlike the increase in the retirement age that has been proposed in modern systems.

Cities for retirees

Along with the creation of a pension for the military, the Roman Empire also saw the need to relocate retired military personnel who preferred to take a plot of land. This is how cities such as Emérita Augusta, nowadays Mérida, were founded in Spain, originally created for discharged military personnel.

León also emerged as a military city, although in this case it was built on a camp of the VII Legion.

The first private pensions were also Roman

Although somewhat different from what we know today as pension plans and other forms of supplementing the state pension, the Romans also created a system of private social protection through the Collegia.

These private associations were responsible for covering the state’s shortcomings in terms of basic relief, such as receiving food or being buried. Each collegium had its own set of membership rules.

Where did modern pensions come from?

The first pensions were developed in Rome, but the current model was not. The pay-as-you-go system of state pensions, one of the most widespread pension models and the one used in Spain, originated in the Germany of Kaiser Wilhelm.

The idea behind the system came from Chancellor Otto von Biskarck, who at the end of the 19th century created what is considered the first social security system for old age. The chancellor devised the system as a formula to fight the trade union and workers’ movement after trying more repressive measures such as banning workers’ parties.

This first retirement system was launched in 1889 and guaranteed a pension for workers from the age of 70. This pension was combined with health and accident insurance for all workers, created in 1883 and 1884, respectively.

And who financed the system? As in the current model, the workers, the business employers and the State.

The origin of pensions in Spain:

Worker protection policies in Spain date back to 1883 with the creation of the Social Reform Commission and later the first social insurance in 1900 through the Law on Work Accidents.

In 1919, the Retiro Obrero (Workers’ Retirement) was introduced by the government of Antonio Saura, and progress continued to be made until the implementation of the SOVI or Compulsory Old Age and Disability Insurance, in 1947.

The original origin of the Social Security system can be traced back to 1963 with the Law on the Bases of Social Security and in 1966 with the General Law on Social Security.

With the fall of Franco’s dictatorship and the approval of the Constitution, the foundations of the welfare state were laid. So much so that Article 41 of the Spanish Magna Carta states that the public authorities must maintain a social security system.

With the approval of Royal Decree Law 36/1978, the bases of the current system were set out.