1979 UK Pension Still Taxed, Thatcher Reforms Tax Rules

In May 1979, a 64‑year‑old widow in Putney, London received a state pension of £96 per month that was still subject to a £4.60 tax deduction. Margaret Thatcher cited the case in her victory speech on 2 May 1979, before becoming Prime Minister.

At that time the London minimum wage was £12.21 per hour, making the pension far below living costs. Thatcher, then leader of the Conservative Party, highlighted the heavy tax burden on small pensions and proposed reforms introducing tax deferral and a 25 % tax‑free portion of pension benefits.

Those reforms created the modern UK pension tax framework, known as the EET (exempt‑exempt‑taxable) model. Indonesia adopts a similar tax‑deferral approach, yet only 15.8 % of its 142 million workers were enrolled in pension schemes in 2024, indicating a need for policy review.